**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      20-F** **/A**




**Amendment
        N. 3**


**(Mark
                one)**o
            **REGISTRATION
                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
                ACT
                OF 1934****OR**x
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
                ACT OF 1934****For
                the fiscal year ended December 31, 2005****OR**o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****Commission
                file number: 1-1519**





**COMPANHIA
                DE BEBIDAS DAS AMÉRICAS - AMBEV***(Exact
                name of Registrant as specified in its charter)***American
                Beverage Company-AmBev***(Translation
                of Registrant’s name into English)***Federative
                Republic of Brazil***(Jurisdiction
                of incorporation or
                organization)*







**Rua
                Dr. Renato Paes de Barros, 1017, 4o andar****04530-001
                São Paulo, SP, Brazil***(Address
                of principal executive offices)***Securities
                registered or to be registered pursuant to Section 12(b) of the
                Act:****Title
                of each class**
            **Name
                of each exchange on which registered****American
                Depositary Shares,**
              **evidenced
                by American Depositary**
              **Receipts,
                each representing**
              **100
                Common Shares**
            **New York
                Stock Exchange****Common
                Shares, no par value*****American
                Depositary Shares,**
              **evidenced
                by American Depositary**
              **Receipts, each
                representing**
              **100
                Preferred Shares**
            **New York
                Stock Exchange****Preferred
                Shares, no par value***







*
            Not
                for trading but only in connection with the registration of the American
                Depositary Shares, pursuant to the requirements of the Securities
                and
                Exchange Commission.Securities
                registered or to be registered pursuant to Section 12(g) of the Act:
                None




Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:




10.5%
      Notes due December 2011


8.75%
      Notes due September 2013




The
      number of total outstanding shares of each of the issuer’s classes of


capital
      or common stock as of the close of the period covered by the annual report
      was:




34,499,422,931
      Common Shares


31,376,650,852
      Preferred Shares




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.




Yesx
            
            Noo




If
      this
      report is an annual or transition report, indicate by check mark if the
      registrant is not required to file reports pursuant to Section 13 or 15(d)
      of
      the Securities Exchange Act of 1934.




Yeso
              
              Nox




Note-Checking
      the box above will not relieve any registrant required to file reports pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
      obligations under those Sections.






Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yesx
            
            Noo




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of 
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act. (check one):




Large
                accelerated filerx
            Accelerated
                Filero
            Non-accelerated
                filero




Indicate
      by check mark which financial statement item the registrant has elected to
      follow.




Item 17o
            
            Item 18x




If
      this
      is an annual report, indicate by check mark whether the registrant is a shell
      company (as defined in Rule 12b-2 of the Exchange Act).




Yeso
            
            Nox















***EXPLANATORY
        NOTE***
 
 This
        Annual Report on Form 20-F/A is being filed as an amendment to our Annual
        Report
        on Form 20-F for the year ended December 31, 2005 which was originally filed
        with the Securities and Exchange Commission on August 23, 2006.
 
 The
        body
        of this Form 20-F/A is unchanged from that set forth in the amendment to
        our
        Annual Report on Form 20-F filed with the Securities and Exchange Commission
        on
        July 5, 2007. However, this Form 20-F/A includes currently dated and executed
        Section 302 and Section 906 certifications of the Chief Executive Officers
        and
        Chief Financial Officer that are attached to this Form 20-F/A as Exhibits
        12.1,
        12.2, 12.3, 13.1, and 13.2. This Form 20-F/A relates to the Company as of
        December 31, 2005 and no further attempt has been made to modify or update
        other
        disclosures presented in our Form 20-F for the year ended December 31,
        2005.









**TABLE
      OF CONTENTS**




**Page**INTRODUCTION
            iACCOUNTING
                PERIODS AND PRINCIPLES
            iCURRENCY
                TRANSLATION
            iINDUSTRY
                DATA
            iTRADEMARKS
            iiCAUTIONARY
                STATEMENT REGARDING FORWARD-LOOKING INFORMATION
            iiItem
                1.
            Identity
                of Directors, Senior Management and Advisers
            1Item
                2.
            Offer
                Statistics and Expected Timetable
            1Item
                3.
            Key
                Information
            1Item
                4.
            Information
                on the Company
            19Item
                5.
            Operating
                and Financial Review and Prospects
            40Item
                6.
            Directors,
                Senior Management and Employees
            70Item
                7.
            Major
                Shareholders and Related Party Transactions
            83Item
                8.
            Financial
                Information
            91Item
                9.
            The
                Offer and Listing
            97Item
                10.
            Additional
                Information
            101Item
                11.
            Quantitative
                and Qualitative Disclosures About Market Risk
            125Item
                12.
            Description
                of Securities Other than Equity Securities
            129Item
                13.
            Defaults,
                Dividend Arrearages and Delinquencies
            130Item
                14.
            Material
                Modifications to the Rights of Security Holders and Use of
                Proceeds
            130Item
                15.
            Controls
                and Procedures
            130Item
                16.
            ReservedItem
                16A.
            Audit
                committee financial expert
            130Item
                16B.
            Code
                of Ethics
            130Item
                16C.
            Principal
                Accountant Fees and Services
            131Item
                16D.
            Exemptions
                from the Listing Standards for Audit Committees
            132Item
                16E.
            Purchases
                of Equity Securities by the Issuer and Affiliated
                Purchasers
            132Item
                18.
            Financial
                Statements
            134Item
                19.
            Exhibits
            135SIGNATURES
            139










**INTRODUCTION**




This
      annual report on Form 20-F relates to the two classes of registered American
      Depositary Shares (“ADSs”) of Companhia de Bebidas das Américas — AmBev
      evidenced by American Depositary Receipts (“ADRs”) representing 100 preferred
      shares of AmBev and ADSs evidenced by ADRs representing 100 common shares,
      of
      AmBev, the U.S.$500,000,000 10.5% notes due 2011 of AmBev (the “2011 notes”) and
      the U.S.$500,000,000 8.75% notes due 2013 of AmBev (the “2013 notes”, and
      together with the “2011 notes”, the “notes”).




In
      this annual report, except as otherwise indicated or as the context otherwise
      requires, the “Company”, “AmBev”, “we”, “us” and “our” refers to Companhia de
      Bebidas das Américas - AmBev and its subsidiaries.




**ACCOUNTING
      PERIODS AND PRINCIPLES**




We
      have prepared our audited annual consolidated financial statements as of
      December 31, 2005, 2004 and 2003, and for the three years ended
      December 31, 2005 in Brazilian *Reais* in
      accordance with accounting practices adopted in Brazil (“Brazilian GAAP”), which
      are based on Brazilian Corporate Law (Law No. 6,404, as amended, which we refer
      to as “Brazilian Corporate Law”), the rules and regulations issued by the *Comissão
      de Valores Mobiliários* (“CVM”),
      the Brazilian Securities Commission, and the accounting standards issued by
      the *Instituto
      dos Auditores Independentes do Brasil* (“IBRACON”),
      or the Brazilian Institute of Independent Accountants), as applied by us in
      preparing our statutory financial statements and annual report and accounts,
      which differ in certain significant respects from accounting principles
      generally accepted in the United States (“U.S. GAAP”). The audited financial
      statements included in this annual report have been prepared in accordance
      with
      Brazilian GAAP and include a reconciliation of net income and shareholders’
equity to U.S. GAAP. In addition to the reconciliation of these key balances,
      the financial statements also include a discussion of the reconciling
      differences in accounting principles and the presentation of the U.S. GAAP
      condensed balance sheets and statement of operations in Brazilian *Reais* .
      The
      financial information contained in this annual report is in accordance with
      Brazilian GAAP, except as otherwise noted.




Percentages
      and some amounts in this annual report have been rounded for ease of
      presentation. Any discrepancies between totals and the sums of the amounts
      listed are due to rounding.




**CURRENCY
      TRANSLATION**




In
      this annual report, references to “ *real* ”,
      “ *reais* ”
or
“R$
      ” are to the legal currency of Brazil, references  to “U.S. dollar” or
“U.S.$” are to the legal currency of the United States and references to
“Canadian dollar” or “C$” are to the legal currency of Canada. We have
      translated some of the Brazilian currency amounts contained in this annual
      report into U.S. dollars. We have also translated some amounts from U.S. dollars
      and Canadian dollars into *reais.* All
      financial information relating to us that is presented in U.S. dollars in this
      annual report has been translated from *reais* at the
      period end exchange rate or average exchange rate prevailing during the period,
      as published by the Central Bank of Brazil (“Central Bank”), unless the context
      otherwise requires. The exchange rate on May 31, 2006 was R$ 2.3005 to
      U.S.$1.00 as published by the Central Bank. The U.S. dollar equivalent
      information presented in this annual report is provided solely for the
      convenience of the readers of this annual report and should not be construed
      as
      implying that the Brazilian currency amounts represent, or could have been
      or
      could be converted into, U.S. dollars at such rates or at any rate. See “Key
      Information—Exchange Rate Information—Exchange Controls” for more detailed
      information regarding the translation of *reais* into
      U.S. dollars.




**INDUSTRY
      DATA**




In
      this annual report, we refer to information regarding the beverage market and
      its segments and competitors from:




**ACNielsen**


Contact:
      Antônio Marcio Mongelli Garotti


Rua
      Monte
      Castelo, 55


Granja
      Viana


Cotia
      -
      São Paulo


CEP
      06710-675


Tel.:
      55
      11 4613 7000


www.acnielsen.com.br
      http://www.acnielsen.com.br




i




**Euromonitor
      International**


Contact:Anne
      Nugent


60-61
      Britton St


London
      EC1M 5NA


Tel
      +44
      20 7251 8024


Fax
      +44
      20 7608 3149


www.euromonitor.com




**TRADEMARKS**




This
      annual report includes the names of our products which constitute trademarks
      or
      trade names which we own or which are owned by others and are licensed to us
      for
      our use. This annual report also contains other brand names, trade names,
      trademarks or service marks of other companies, and these brand names, trade
      names, trademarks or service marks are the property of those other
      companies.




**CAUTIONARY
      STATEMENT REGARDING**


**FORWARD-LOOKING
      INFORMATION**




We
      make forward-looking statements in this annual report that are subject to risks
      and uncertainties. These statements are based on the beliefs and assumptions
      of
      our management, and on information currently available to us. Forward-looking
      statements include statements regarding the intent, belief or current
      expectations of AmBev or its directors or executive officers with respect to,
      but not limited to:




·
            the
                declaration or payment of dividends;·
            the
                direction of future operations;·
            the
                implementation of principal operating strategies, including existing,
                potential acquisition or joint venture transactions or other investment
                opportunities;·
            the
                implementation of AmBev’s financing strategy and capital expenditure
                plans;·
            the
                utilization of AmBev’s subsidiaries’ income tax losses;·
            the
                factors or trends affecting AmBev’s financial condition, liquidity or
                results of operations;·
            the
                implementation of the measures required under AmBev’s performance
                agreement entered into with the*Conselho
                Administrativo de Defesa Econômica*(“CADE”); and·
            the
                implementation of the measures required by Argentina’s*Comision
                Nacional de Defensa de la Competencia*(“CNDC”) under AmBev’s agreements with Beverages Associates Corp. (“BAC”)
                and Quilmes Industrial (Quinsa), Société Anonyme
                (“Quinsa”).




Forward-looking
      statements also include information concerning possible or assumed future
      results of operations of AmBev set forth under “Information on the Company—AmBev
      Business Overview” and “Financial Information” as well as statements preceded
      by, followed by, or that include, the words “believes”, “may”, “will”,
“continues”, “expects”, “anticipates”, “intends”, “plans”, “estimates” or
      similar expressions.




Forward-looking
      statements are not guarantees of performance. They involve risks, uncertainties
      and assumptions because they relate to future events and therefore depend on
      circumstances that may or may not occur in the future. The future results and
      shareholder values of AmBev may differ materially from those expressed in or
      suggested by these forward-looking statements. Many of the factors that will
      determine these results and values are beyond our ability to control or predict.
      Investors are cautioned not to put undue reliance on any forward-looking
      statements.




ii




Investors
      should understand that the following important factors, in addition to those
      discussed in this annual report, could affect the future results of AmBev and
      could cause results to differ materially from those expressed in such
      forward-looking statements:




·
            general
                economic conditions in the principal geographic markets of AmBev,
                such as
                the rates of economic growth, fluctuations in exchange rates or
                inflation;·
            governmental
                intervention, resulting in changes to the economic, tax or regulatory
                environment in Brazil or other countries in which we
                operate;·
            industry
                conditions, such as the strength of product demand, the intensity
                of
                competition, pricing pressures, the introduction of new products
                by AmBev,
                the introduction of new products by competitors, changes in technology
                or
                in the ability of AmBev to obtain products and equipment from suppliers
                without interruption and at reasonable prices, and the financial
                conditions of the customers and distributors of AmBev;
                and·
            operating
                factors, such as the continued success of sales, manufacturing and
                distribution activities of AmBev and the consequent achievement of
                efficiencies.




iii




**PART
      I**




**Identity
      of Directors, Senior Management and Advisers**




Not
      Applicable.




**Offer
      Statistics and Expected Timetable**




Not
      Applicable.




**Key
      Information**




**SELECTED
      FINANCIAL DATA**




The
      following financial information of AmBev is only a summary and should be read
      in
      conjunction with, and is qualified in its entirety by reference to, the audited
      annual consolidated financial statements of AmBev and the related notes which
      are included in this annual report.




Our
      selected historical financial data prepared under Brazilian GAAP and U.S. GAAP
      set forth below as of and for each of the years ended December 31, 2005,
      2004, 2003, 2002 and 2001 have been derived from AmBev’s consolidated financial
      statements as of and for the periods then ended. Brazilian GAAP differs
      significantly from U.S. GAAP and you should read the financial information
      in
      conjunction with our audited financial statements, as well as “Operating and
      Financial Review and Prospects”.


Subsequent
              to the issuance of the Company’s 2005 consolidated financial statements, the
              Company’s management determined that the transactions described in Note 23
              (a)
              of our financial statements attached herein had not been correctly
              accounted for
              under US GAAP for the years ended December 31, 2004 and 2005. As a
              result, the
              reconciliation of accounting practices adopted in Brazil with accounting
              principles generally accepted in the United States of America and the
              condensed
              financial information prepared in accordance with US GAAP included
              in Note 23
              have been restated. Net income under US GAAP was restated by R$(139.2)
              million
              in 2005 and R$80.7 million in 2004 and shareholders’ equity was restated by R$
              181.3 million in 2005 and R$ 156.0 million in 2005. A summary of the
              impact of
              these restatements in our US GAAP financial information originally
              reported is
              as follows:
  2005As
                        OriginallyReported
                    
                    Restated
                    
                    Effect
                        ofChangeShareholders’
                        equity under US GAAP
                    
                    
                    20,420.6
                    
                    
                    20,601.9
                    
                    
                    181.3Net
                        income under US GAAP
                    
                    
                    2,850.2
                    
                    
                    2,711.0
                    
                    
                    (139.2
                    )Earnings
                        per thousand shares - BasicPreferred
                    
                    
                    52.95
                    
                    
                    50.36Common
                    
                    
                    48.13
                    
                    
                    45.78Earnings
                        per thousand shares - DillutedPreferred
                    
                    
                    52.82
                    
                    
                    50.24Common
                    
                    
                    48.02
                    
                    
                    45.682004As
                        OriginallyReported
                    
                    
                    Restated
                    
                    
                    Effect
                        ofChangeShareholders’
                        equity under US GAAP
                    
                    
                    17,720.3
                    
                    
                    17,876.3
                    
                    
                    156.0Net
                        income under US GAAP
                    
                    
                    1,392.0
                    
                    
                    1,472.7
                    
                    
                    80.7Earnings
                        per thousand shares - BasicPreferred
                    
                    
                    30.74
                    
                    
                    32.52Common
                    
                    
                    27.94
                    
                    
                    29.56Earnings
                        per thousand shares - DillutedPreferred
                    
                    
                    30.57
                    
                    
                    32.34Common
                    
                    
                    27.79
                    
                    
                    29.40


On
      October 4, 2002, Companhia Brasileira de Bebidas (“CBB”) completed an exchange
      offer of the U.S.$500 million 10.5% notes due 2011, in the U.S. securities
      markets. Also, in September 2003, CBB issued U.S.$500 million 8.75% notes
      due 2013 in a transaction exempt from registration under the U.S. Securities
      Act
      of 1933, as amended. On September 15, 2004, CBB completed an exchange offer
      of
      such notes in the U.S. securities markets. AmBev fully and unconditionally
      guaranteed these two issuances, and following CBB’s merger into AmBev on
      May 31, 2005, succeeded CBB in all its rights and obligations under the
      indenture governing these notes.




On
      August 27, 2004, AmBev completed the transactions contemplated by an agreement
      (the “Incorporação Agreement”) with Interbrew S.A./N.V., now known as InBev
      S.A./N.V. (“InBev”), Labatt Brewing Company Ltd. (“Labatt”) and Labatt Brewing
      Canada Holding Ltd., then a wholly owned subsidiary of InBev (“Mergeco”), which
      indirectly held 99.9% of the capital stock of Labatt. Pursuant to the
      Incorporação Agreement, Mergeco was merged into AmBev by means of an
      Incorporação under Brazilian law. Mergeco held 99.9% of the capital stock
      of Labatt Holding ApS (“Labatt ApS”), a corporation organized under the laws of
      Denmark, and Labatt ApS owns all the capital stock of Labatt. Upon
      completion of the Incorporação, AmBev held 99.9% of the capital stock of Labatt
      ApS, and indirectly, of Labatt, which constitutes our Canadian-based
      operations. The results of operations for Labatt have been fully
      consolidated since August 27, 2004 in our audited financial
      statements.




1




**STATEMENT
      OF OPERATIONS DATA**




**As
                of or for the year ended December 31,****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001*****(R$
                in millions, except for per share amounts, number of shares and other
                operating data)*****Brazilian
                GAAP**Gross
                sales, before taxes, discounts and returns
            
            
            28,878.7
            
            
            23,297.6
            
            
            17,143.5
            
            
            14,279.9
            
            
            13,131.0Net
                sales
            
            
            15,958.6
            
            
            12,006.8
            
            
            8,683.8
            
            
            7,325.3
            
            
            6,525.6Cost
                of sales
            
            
            (5,742.3
            )
            
            (4,780.5
            )
            
            (4,044.2
            )
            
            (3,341.7
            )
            
            (3,366.2
            )Gross
                profit
            
            
            10,216.3
            
            
            7,226.3
            
            
            4,639.6
            
            
            3,983.6
            
            
            3,159.4Selling,
                General and Administrative(1)
            
            
            (5,173.6
            )
            
            (3,611.1
            )
            
            (2,333.6
            )
            
            (1,932.7
            )
            
            (1,783.6
            )5,042.7
            
            
            3,615.2
            
            
            2,306.1
            
            
            2,050.9
            
            
            1,375.8Provision
                for contingencies and other
            
            
            (71.5
            )
            
            (260.2
            )
            
            (187.9
            )
            
            (123.7
            )
            
            (33.9
            )Other
                operating expenses, net
            
            
            (1,075.4
            )
            
            (420.9
            )
            
            (240.1
            )
            
            199.4
            
            
            152.2Financial
                income
            
            
            521.2
            
            
            468.6
            
            
            601.8
            
            
            2,530.3
            
            
            358.4Financial
                expenses
            
            
            (1,607.9
            )
            
            (1,244.9
            )
            
            (508.7
            )
            
            (3,277.3
            )
            
            (861.5
            )Equity
                in Investees
            
            
            2.0
            
            
            5.6
            
            
            (6.2
            )
            
            —
            
            
            —**Operating
                income****(2)**
            
            
            **2,811.1**
            
            
            **2,163.4**
            
            
            **1,964.9**
            
            
            **1,379.6**
            
            
            **991.0**Non-operating
                income (expense), net
            
            
            (234.3
            )
            
            (333.9
            )
            
            (100.7
            )
            
            (72.2
            )
            
            2.3Income
                tax benefit (expense)
            
            
            (845.1
            )
            
            (511.8
            )
            
            (426.1
            )
            
            280.6
            
            
            (51.9
            )Income
                before equity in affiliates, profit sharing and minority
                interest
            
            
            1,731.7
            
            
            1,317.6
            
            
            1,438.1
            
            
            1,588.0
            
            
            941.4Profit
                sharing and contributions
            
            
            (202.8
            )
            
            (152.4
            )
            
            (23.6
            )
            
            (125.1
            )
            
            (157.1
            )Minority
                interest
            
            
            16.8
            
            
            (3.7
            )
            
            (2.9
            )
            
            47.4
            
            
            0.3**Net
                income**
            
            
            **1,545.7**
            
            
            **1,161.5**
            
            
            **1,411.6**
            
            
            **1,510.3**
            
            
            **784.6**Net
                income per 1,000 shares (excluding treasury shares) at year
                end(3)
            
            
            23.65
            
            
            21.26
            
            
            37.23
            
            
            39.48
            
            
            20.31Net
                income per ADS(4)at
                year end
            
            
            2.37
            
            
            2.13
            
            
            3.72
            
            
            3.95
            
            
            2.03Dividends
                and interest attributable to shareholders’ equity per 1,000 shares
                (excluding treasury shares)(3)(5)(6)Common
                shares
            
            
            17.32
            
            
            20.86
            
            
            23.15
            
            
            12.40
            
            
            7.17Preferred
                shares
            
            
            19.05
            
            
            22.95
            
            
            25.46
            
            
            13.64
            
            
            7.89Number
                of shares outstanding at year end, excluding treasury shares (in
                thousands)Common
                shares
            
            
            34,488,943
            
            
            23,497,514
            
            
            15,631,332
            
            
            15,694,772
            
            
            15,801,482Preferred
                shares
            
            
            30,857,271
            
            
            31,129,892
            
            
            22,281,302
            
            
            22,551,143
            
            
            22,819,443Total
                Shares
            
            
            65,346,214
            
            
            54,627,406
            
            
            37,912,634
            
            
            38,245,915
            
            
            38,620,925




2




**As
                  of or for the year ended December 31,****2005**
              
              **2004**
              
              **2003**
              
              **2002**
              
              **2001****(Restated)**
              
              **(Restated)*****(R$
                    in millions, except for per share amounts, number of shares and
                    other
                    operating data)*****U.S.
                  GAAP**Net
                  sales
              
              
              14,836.7
              
              
              10,936.7
              
              
              7.929.4
              
              
              7,310.4
              
              
              6,566.3Operating
                  income
              
              
              4,478.3
              
              
              2,856.6
              
              
              2,038.2
              
              
              1,569.2
              
              
              1,309.0Net
                  income (loss)
              
              
              2,711.0
              
              
              1,472.7
              
              
              1,689.4
              
              
              1,642.2
              
              
              822.9Net
                  income per 1,000 shares (weighted average)(3)(7)-
                  BasicCommon
                  shares
              
              
              45.78
              
              
              29.56
              
              
              39.46
              
              
              37.93
              
              
              18.84Preferred
                  shares
              
              
              50.36
              
              
              32.52
              
              
              43.41
              
              
              41.72
              
              
              20.72-
                  DilutedCommon
                  shares
              
              
              45.68
              
              
              29.40
              
              
              39.16
              
              
              37.62
              
              
              18.59Preferred
                  shares
              
              
              50.24
              
              
              32.34
              
              
              43.08
              
              
              41.38
              
              
              20.45Net
                  income (loss) per ADS(4)-
                  BasicCommon
                  shares
              
              
              4.58
              
              
              2.96
              
              
              3.95
              
              
              3.79
              
              
              1.88Preferred
                  shares
              
              
              5.04
              
              
              3.25
              
              
              4.34
              
              
              4.17
              
              
              2.07-
                  DilutedCommon
                  shares
              
              
              4.57
              
              
              2.94
              
              
              3.91
              
              
              3.76
              
              
              1.86Preferred
                  shares
              
              
              5.02
              
              
              3.23
              
              
              4.31
              
              
              4.14
              
              
              2.05Dividends
                  and interest attributable to shareholders’ equity per 1,000 shares
                  (weighted average)(3)(5)(6)-
                  BasicCommon
                  shares
              
              
              38.55
              
              
              11.21
              
              
              22.16
              
              
              4.53
              
              
              5.74Preferred
                  shares
              
              
              42.40
              
              
              12.33
              
              
              24.38
              
              
              4.99
              
              
              6.31-
                  DilutedCommon
                  shares
              
              
              38.46
              
              
              11.15
              
              
              21.93
              
              
              4.50
              
              
              5.67Preferred
                  shares
              
              
              42.30
              
              
              12.26
              
              
              24.12
              
              
              4.94
              
              
              6.23Weighted
                  average number of shares (thousands)(3)(7)(8)(19)-
                  BasicCommon
                  shares
              
              
              25,584,256
              
              
              22,345,110
              
              
              18,664,356
              
              
              18,908,907
              
              
              19,170,168Preferred
                  shares
              
              
              30,574,965
              
              
              24,970,421
              
              
              21,952,196
              
              
              22,173,258
              
              
              22,291,121-
                  DilutedCommon
                  shares
              
              
              25,584,256
              
              
              22,388,341
              
              
              18,714,472
              
              
              18,962,604
              
              
              19,257,270Preferred
                  shares
              
              
              30,699,336
              
              
              25,186,577
              
              
              22,202,775
              
              
              22,441,743
              
              
              22,726,632




3




**BALANCE
      SHEET DATA**




**As
                of or for the year ended December 31,****2005**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002**
            
            
            **2001*****(R$
                in millions, except for per share amounts, number of shares and other
                operating data)*****Brazilian
                GAAP**Balance
                Sheet Data:Cash,
                cash equivalents and short term investments
            
            
            1,096.3
            
            
            1,505.4
            
            
            2,534.2
            
            
            3,290.0
            
            
            2,562.9Total
                current assets
            
            
            4,931.3
            
            
            5,379.6
            
            
            5,500.5
            
            
            5,571.4
            
            
            4,684.9Prepaid
                pension benefit cost
            
            
            20.0
            
            
            20.6
            
            
            22.0
            
            
            21.6
            
            
            20.8Investments
            
            
            16,763.6
            
            
            18,218.7
            
            
            1,711.4
            
            
            637.3
            
            
            662.6Property,
                plant and equipment, net
            
            
            5,404.6
            
            
            5,531.7
            
            
            4,166.3
            
            
            3,330.6
            
            
            3,277.7Deferred
                income tax - non-current
            
            
            2,042.0
            
            
            2,216.6
            
            
            1,831.8
            
            
            1,558.4
            
            
            1,160.3Total
                assets
            
            
            33,492.8
            
            
            32,802.6
            
            
            14,830.1
            
            
            12,381.5
            
            
            11,028.8Short-term
                debt(9)
            
            
            1,209.4
            
            
            3,443.1
            
            
            1,976.1
            
            
            607.4
            
            
            1,720.0Total
                current liabilities
            
            
            5,052.3
            
            
            8,771.7
            
            
            4,720.0
            
            
            2,833.7
            
            
            3,412.0Long-term
                debt(10)
            
            
            5,994.2
            
            
            4,367.6
            
            
            4,004.3
            
            
            3,879.3
            
            
            2,849.4Accrued
                liability for contingencies
            
            
            1,128.2
            
            
            1,471.0
            
            
            1,232.9
            
            
            989.3
            
            
            815.5Sales
                tax deferrals and other tax credits
            
            
            698.9
            
            
            711.9
            
            
            768.7
            
            
            803.1
            
            
            746.8Post-retirement
                benefit(11)
            
            
            584.6
            
            
            646.0
            
            
            72.9
            
            
            53.4
            
            
            55.6Total
                long-term liabilities
            
            
            8,300.7
            
            
            6,822.5
            
            
            5,605.5
            
            
            5,339.1
            
            
            4,164.4Minority
                interest
            
            
            122.6
            
            
            212.5
            
            
            196.4
            
            
            79.1
            
            
            88.9Subscribed
                and paid-up capital
            
            
            5,691.4
            
            
            4,742.8
            
            
            3,124.1
            
            
            3,046.2
            
            
            2,944.3Shareholders’
                equity
            
            
            19,867.3
            
            
            16,995.9
            
            
            4,382.9
            
            
            4,129.6
            
            
            3,363.5**U.S.
                GAAP**Total
                assets
            
            
            35,447.5
            
            
            34,069.0
            
            
            13,766.0
            
            
            11,584.6
            
            
            10,195.9Shareholders’
                equity
            
            
            20,601.9
            
            
            17,876.3
            
            
            4,382.9
            
            
            3,960.6
            
            
            2,839.9




4




**OTHER
      DATA**




**As
                of or for the year ended December 31,****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001*****(R$
                in millions, except for per share amounts, number of shares and other
                operating data)*****Brazilian
                GAAP**Other
                Financial Information:Net
                working capital(12)
            
            
            (121.0
            )
            
            (3,392.1
            )
            
            780.5
            
            
            2,737.7
            
            
            1,273.0Cash
                dividends paid(5)
            
            
            2,272.0
            
            
            602.9
            
            
            1,026.9
            
            
            335.6
            
            
            313.4Depreciation
                and amortization of deferred charges(13)
            
            
            1,262.6
            
            
            922.2
            
            
            766.3
            
            
            659.5
            
            
            613.9Capital
                expenditures(14)
            
            
            1,369.5
            
            
            1,273.7
            
            
            862.2
            
            
            544.7
            
            
            446.8Operating
                cash flows - generated (used)(15)
            
            
            4,149.6
            
            
            3,418.7
            
            
            2,527.6
            
            
            3,595.0
            
            
            1,006.6Investing
                cash flows - generated (used)(15)
            
            
            (1,619.3
            )
            
            110.7
            
            
            (2,014.7
            )
            
            (1,603.1
            )
            
            (1,687.4
            )Financing
                cash flows-generated (used)(15)
            
            
            (2,973.9
            )
            
            (3,433.8
            )
            
            (346.7
            )
            
            (2,912.2
            )
            
            1,418.0Other
                Operating Data:Total
                production capacity - beer(16)
            
            
            121.9
                million
              hl
            
            
            114.2
                million
              hl
            
            
            88.3
                million
              hl
            
            
            89.7
                million
              hl
            
            
            89.8
                million
              hlTotal
                production capacity - CSD & NANC(16)
            
            
            42.4
                million
              hl
            
            
            43.9
                million
              hl
            
            
            45.7
                million
              hl
            
            
            37.3
                million
              hl
            
            
            38.8
                million
              hlTotal
                beer volume sold(17)
            
            
            76.7
                million
              hl
            
            
            63.9
                million
              hl
            
            
            56.9
                million
              hl
            
            
            62.0
                million
              hl
            
            
            62.4
                million
              hlTotal
                CSD & NANC volume sold(17)
            
            
            23.6
                million
              hl
            
            
            22.8
                million
              hl
            
            
            19.2
                million
              hl
            
            
            19.6
                million
              hl
            
            
            18.5
                million
              hlNumber
                of employees(18)
            
            
            28,567
            
            
            25,974
            
            
            18,890
            
            
            18.570
            
            
            18,136




**Footnotes
      to selected financial information**





(1)
            General
                and administrative expenses include director’s fees.(2)
            Operating
                income under Brazilian GAAP is presented after financial income and
                financial expense.(3)
            The
                information is provided per thousand shares because AmBev common
                and
                preferred shares are generally traded on the São Paulo Stock Exchange in
                blocks of one thousand shares.(4)
            ADS
                represents American Depositary Shares. Each ADS represents 100
                shares.(5)
            Includes
                dividends and interest attributable to shareholders’ equity (including
                withholding tax paid by AmBev in respect thereof). The dividend and
                interest attributable to shareholders equity per 1,000 shares for
                Brazilian GAAP purposes is calculated net of withholding tax and
                therefore
                represents the amounts received as disclosed in “Dividends”. We changed
                the criteria for reporting this amount in 2002 and therefore the
                dividends
                per share disclosed in the years prior to 2002 do not conform to
                those
                disclosed in our 2001 annual report on Form 20-F.(6)
            Brazilian
                GAAP and U.S. GAAP differ on the recognition of declared / proposed
                dividends, specifically with regard to when the dividend should be
                recognized. The executive officers are required to propose a dividend
                at
                year end, which is subject to ratification by the shareholders at
                a
                general meeting and must be recognized under Brazilian GAAP. However,
                under U.S. GAAP, the proposed dividends may be modified or ratified
                by the
                shareholders at a general meeting and are treated as a deduction
                from
                shareholders’ equity, only when
                ratified.




5




(7)
            In
                the U.S. GAAP selected financial data only, earnings per share are
                calculated dividing the net income by the weighted average number
                of
                common and preferred shares outstanding during the relevant periods.
                In
                the Brazilian GAAP selected financial information section, earnings
                per
                share are calculated by dividing by the number of shares outstanding
                at
                the year end. AmBev’s preferred shares are entitled to dividends 10%
                greater than the dividends paid to common shares.(8)
            Under
                U.S. GAAP we have included the net assets of FAHZ, one of our major
                shareholders, on our balance sheet as of December 31, 2005, 2004,
                2003,
                2002 and 2001. As a result, AmBev shares owned by FAHZ are treated
                as
                treasury shares, rather than outstanding shares, thereby reducing
                the
                number of our weighted average outstanding shares and increasing
                our
                earnings or loss per share. For further information, please refer
                to our
                consolidated financial statements contained within this annual
                report.(9)
            Includes
                current portion of long-term debt.(10)
            Excludes
                current portion of long-term debt.(11)
            Consistent
                with accounting practice under Brazilian GAAP, we had not recognized
                our
                actuarial obligation for pension liabilities and post-retirement
                benefits,
                including medical benefits to retirees in our financial statements
                prior
                to December 31, 2001. Pension amounts due to the pension plan were
                treated
                on an accrual basis as the obligations fell due. However, following
                the
                issuance of accounting standard NPC No. 26, we are required to record
                these actuarial obligations beginning in 2002. We had the option
                to
                account for these actuarial obligations at December 31, 2001 either
                against retained earnings or prospectively as a charge against earnings
                over five years. We elected to recognize the liability against retained
                earnings on December 31, 2001. The standard requires comprehensive
                recording of pension expenses and obligations on an actuarial basis
                instead of, as was previously required, based on the required
                contributions for the relevant year.(12)
            Represents
                total current assets less total current liabilities.(13)
            Includes
                depreciation of property, plant and equipment and amortization of
                deferred
                charges.(14)
            Represents
                cash expenditures for property, plant and equipment.(15)
            Operating,
                Investing and Financing cash flows data is derived from our consolidated
                financial statements.(16)
            Represents
                available production capacity of AmBev and its respective subsidiaries,
                domestic and international; Quinsa’s production capacity is not
                considered; (hl is the abbreviation for hectoliters; CSD & NANC is the
                abbreviation for Carbonated Soft Drinks and Non Alcoholic and Non
                Carbonated Soft Drinks).(17)
            Represents
                full-year volumes of AmBev and its respective subsidiaries (except
                Quinsa
                and its subsidiaries).  Labatt’s volumes for 2004 were consolidated
                from August 27 through December 31.(18)
            Includes
                all production- and non-production-related employees of AmBev and
                its
                respective subsidiaries, excluding Quinsa and its
                subsidiaries.(19)
            In
                the U.S. GAAP selected financial data only, earnings per share have
                been
                restated to give retroactive effect to the share dividend distributed
                by
                AmBev on May 31, 2005.




**DIVIDENDS**




**Dividend
      Policy**




The
      timing, frequency and amount of future dividend payments, if any, will depend
      upon various factors the Board of Directors of AmBev considers relevant,
      including the earnings and the financial condition of AmBev. AmBev’s bylaws
      provide for a mandatory dividend of 35% of its annual net income, if any, as
      determined and adjusted under Brazilian GAAP (“adjusted income”). The mandatory
      dividend includes amounts paid as interest attributable to shareholders’ equity,
      which is equivalent to a dividend but is a more tax efficient way to distribute
      earnings because they are generally deductible by the company for Brazilian
      income tax purposes. However, shareholders (including holders of ADSs) have
      to
      pay Brazilian withholding tax on the amounts received as interest attributable
      to shareholders’ equity, whereas no such payment is required in connection with
      dividends received. Although AmBev may distribute earnings in the form of
      interest, the amount received by shareholders is the same as or higher than
      if the distribution were made in the form of dividends. Withholding tax is
      usually paid by Brazilian companies, including AmBev, on behalf of their
      shareholders.




6




Adjusted
      income may be capitalized, used to absorb losses or otherwise appropriated
      as
      allowed under Brazilian Corporate Law; therefore, any adjusted income may no
      longer be available to be paid as dividends. AmBev may also not pay dividends
      to
      its shareholders in any particular fiscal year, upon the determination by the
      Board of Directors that such distributions would be inadvisable in view of
      AmBev’s financial condition. Any such dividends not distributed would be
      allocated to a special reserve account for future payment to shareholders,
      unless it is used to offset subsequent losses. For further information on this
      matter see “Risk Factors—Risks Relating to our Securities—AmBev shareholders may
      not receive any dividends”. Any dividends payable on AmBev’s preferred shares
      must be 10% greater than those payable on AmBev’s common shares. See “Additional
      Information—Memorandum and Articles of Association—Dividends and
      Reserves—Dividend Preference of Preferred Shares”.




For
      further information on Brazilian Corporate Law provisions relating to required
      reserves and payment of dividends or interest attributable to shareholders’
equity, as well as specific rules applicable to the payment of dividends by
      AmBev, see “Additional Information—Memorandum and Articles of
      Association—Dividends and Reserves”.




7




**AmBev
      - Dividends and Interest Attributable to Shareholders’
Equity**




The
      following table shows the cash dividends paid by AmBev to its preferred and
      common shareholders since September 17, 2001 in *Reais* and in
      U.S. dollars translated from Brazilian *Reais* at the
      commercial exchange rate as of the date of payment. The amounts include interest
      attributable to shareholders’ equity, net of withholding tax. See “Additional
      Information—Memorandum and Articles of Association—Dividends and
      Reserves—Interest Attributable to Shareholders’ Equity”. In addition, on
      May 31, 2005, AmBev distributed a share dividend to each shareholder of
      AmBev at a rate of one AmBev common share for every five preferred
      and/or common shares held by such shareholder at that date. See
“Information on the Company—History and Development of the
      Company”.




**Earnings
                generated**
            
            **First
                payment date**
            
            ***Reais*****per**
              **thousand****(1)**
              **share****(2)**
            
            **U.S.
                dollar equivalent per**
              **thousand****(1)****shares at payment date****(3)**First
                half 2001
            
            September
                17, 2001
            
            3.11
            
            (preferred)
            
            1.162.83
            
            (common)
            
            1.06Second
                half 2001
            
            February
                19, 2002
            
            4.78
            
            (preferred)
            
            1.974.34
            
            (common)
            
            1.79First
                half 2002
            
            November
                25, 2002
            
            4.37
            
            (preferred)
            
            1.153.97
            
            (common)
            
            1.04Second
                half 2002
            
            February
                28, 2003
            
            9.27
            
            (preferred)
            
            2.608.43
            
            (common)
            
            2.37First
                half 2003
            
            October
                13, 2003
            
            18.70
            
            (preferred)
            
            6.5917.00
            
            (common)
            
            5.99Second
                half 2003
            
            March
                25, 2004
            
            6.75
            
            (preferred)
            
            2.306.14
            
            (common)
            
            2.09First
                half 2004
            
            October
                8, 2004
            
            5.80
            
            (preferred)
            
            2.055.28
            
            (common)
            
            1.87Second
                half 2004
            
            February
                15, 2005
            
            17.15
            
            (preferred)
            
            6.6615.59
            
            (common)
            
            6.05First
                half 2005
            
            September
                30, 2005
            
            10.69
            
            (preferred)
            
            4.829.72
            
            (common)
            
            4.38Second
                half 2005
            
            December
                29, 2005
            
            8.36
            
            (preferred)
            
            3.577.60
            
            (common)
            
            3.25March
                31, 2006
            
            6.32
            
            (preferred)
            
            2.915.75
            
            (common)
            
            2.65First
                half 2006
            
            June
                30, 2006
            
            6.08
            
            (preferred)
            
            2.815.53
            
            (common)
            
            2.56





(1)
            The
                information is provided per thousand shares because AmBev common
                and
                preferred shares are generally traded on the São Paulo Stock Exchange in
                blocks of one thousand.(2)
            The
                amounts set forth above are amounts actually received  by
                shareholders, which are net of withholding tax. The financial statements
                present the amounts actually disbursed, including the withholding
                tax on
                interest on shareholders’ equity, which was paid on behalf of AmBev’s
                shareholders. The dividends per thousand shares set forth above are
                calculated based on the number of outstanding shares at the date
                the
                distributions were declared.(3)
            Translated
                to U.S. dollars at the exchange rate in effect at the date of
                payment.




8




**EXCHANGE
      RATE INFORMATION**




There
      were previously two foreign exchange markets in Brazil. With the enactment
      of
      National Monetary Council Resolution No. 3,265 of March 14, 2005, the foreign
      exchange markets were consolidated to form one exchange market. All transactions
      involving foreign currency in the Brazilian market, whether carried out by
      investors resident or domiciled in Brazil or investors resident or domiciled
      abroad, must now be conducted on this exchange market, through institutions
      authorized by the Central Bank, subject to the rules of the Central
      Bank.




The
      following tables set forth commercial market rates for the purchase of U.S.
      dollars for the periods indicated. Foreign exchange transactions were carried
      out on either the commercial rate exchange market or the floating rate exchange
      market. Rates in the two markets were generally the same. The table uses the
      commercial selling rate prior to March 14, 2005.




**Annual
                Exchange Rates of*****Reais*****per U.S.$1.00****2005**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002**
            
            
            **2001**Low
            
            R$
            2.1633
            
            R$
            2.6544
            
            R$
            2.8219
            
            R$
            2.2709
            
            R$
            1.9357High
            
            
            2.7621
            
            
            3.2051
            
            
            3.6623
            
            
            3.9552
            
            
            2.8007Average(1)
            
            
            2.4125
            
            
            2.9257
            
            
            3.0600
            
            
            2.9983
            
            
            2.3532Period
                End
            
            
            2.3407
            
            
            2.6544
            
            
            2.8892
            
            
            3.5333
            
            
            2.3204







*Source*:
                Central Bank(1)
            Represents
                the average of the month-end exchange rates during the relevant
                period.




**Monthly
        Exchange Rates of** ***Reais*** **per U.S.$1.00**


**2006****July**
            
            **June**
            
            **May**
            
            **April**
            
            **March**
            
            **February**
            
            **January**Low
            
            R$
            2.1646
            
            R$
            2.1643
            
            R$
            2.0586
            
            R$
            2.0892
            
            R$
            2.1067
            
            R$
            2.1177
            
            R$
            2.2116High
            
            R$
            2.2130
            
            R$
            2.388
            
            R$
            2.3711
            
            R$
            2.1542
            
            R$
            2.2238
            
            R$
            2.2217
            
            R$
            2.3460







*Source*:
                Central Bank




We
      will pay any cash dividends and make any other cash distributions in *reais* .
      Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts
      received by the holders of ADSs on conversion by the depositary of such
      distributions into U.S. dollars for payment to holders of ADSs. Fluctuations
      in
      the exchange rate between the *real* and the
      U.S. dollar may also affect the U.S. dollar equivalent of *real* price of
      our shares on the São Paulo Stock Exchange. For further information on this
      matter see “Risk Factors—Risks Relating to Our Securities”.




**EXCHANGE
      CONTROLS**




There
      are no restrictions on ownership of the ADSs or the preferred or common shares
      by individuals or legal entities domiciled outside of Brazil.




The
      right to convert dividend payments, interest attributable to shareholders’
equity payments and proceeds from the sale of preferred or common shares into
      foreign currency and to remit such amounts outside Brazil is subject to exchange
      control restrictions and foreign investment legislation which generally
      requires, among other things, that relevant investments be registered with
      the
      Central Bank. Restrictions on the remittance of foreign capital abroad could
      hinder or prevent Banco Itaú S.A. (the “custodian”) or holders who have
      exchanged AmBev’s ADSs for shares of AmBev, from converting dividend
      distributions, interest on shareholders’ equity or the proceeds from any sale of
      shares of AmBev into U.S. dollars and remitting such U.S. dollars abroad.
      Holders of AmBev ADSs could be adversely affected by delays in or refusal to
      grant any required governmental approval for conversions of *real* payments
      and remittances abroad.




9




Under
      Brazilian law relating to foreign investment in the Brazilian capital markets
      (“Foreign Investment Regulations”), foreign investors registered with the CVM
      and acting through authorized custody accounts managed by local agents may
      buy
      and sell shares on Brazilian stock exchanges without obtaining separate
      certificates of registration for each transaction. Foreign investors may
      register their investment under Law 4,131/62 or Resolution No. 2,689/00 of
      the
      National Monetary Council (“Resolution No. 2,689”).




Under
      Resolution No. 2,689, foreign investors may invest in almost all financial
      assets and engage in almost all transactions available in the Brazilian
      financial and capital markets, *provided* that
      certain requirements are fulfilled. In accordance with Resolution No. 2,689,
      the
      definition of a foreign investor includes individuals, legal entities, mutual
      funds and other collective investment entities, domiciled or headquartered
      abroad.




Securities
      and other financial assets held by a Resolution No. 2,689 investor must be
      registered or maintained in deposit accounts or under the custody of an entity
      duly licensed by the Central Bank or the CVM. In addition, any transfer of
      securities held under Resolution No. 2,689 must be carried out in the stock
      exchanges or through organized over-the-counter markets licensed by the CVM,
      except for specific types of transfers.




Under
      current legislation, the Brazilian government may impose temporary restrictions
      on remittances of foreign capital abroad in the event of a serious imbalance
      or
      an anticipated serious imbalance of Brazil’s balance of payments. For
      approximately six months in 1989 and early 1990, the Brazilian government froze
      all dividend and capital repatriations held by the Central Bank that were owed
      to foreign equity investors in order to conserve Brazil’s foreign currency
      reserves. These amounts were subsequently released in accordance with Brazilian
      government directives. We cannot assure you that the Brazilian government will
      not impose similar restrictions on foreign repatriations in the future. See
      “Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate”
and “Risk Factors—Risks Relating to Our Securities”. The Brazilian government
      has exercised, and continues to exercise, significant influence over the
      Brazilian economy. Brazilian economic and political conditions have a direct
      impact on our business.




Pursuant
      to the registration obtained by AmBev with the Central Bank in the name of
      The
      Bank of New York with respect to the AmBev ADSs to be maintained by the
      custodian, Banco Itaú S.A., on behalf of The Bank of New York, the
      custodian and The Bank of New York will be able to convert dividends and
      other distributions with respect to the AmBev shares represented by AmBev ADSs
      into foreign currency and remit the proceeds outside of Brazil. In the event
      that a holder of AmBev ADSs exchanges such ADSs for AmBev shares, such holder
      will be entitled to continue to rely on The Bank of New York’s registration
      for only five business days after such exchange, after which such holder must
      obtain its own registration. Any such holder may not be able to obtain and
      remit
      abroad U.S. dollars or other hard currencies upon the disposition of the shares
      or distributions with respect to such disposition, unless such holder qualifies
      under the Foreign Investment Regulations and obtains its own registration,
      and
      such holder generally will be subject to less favorable Brazilian tax treatment
      than a holder of AmBev ADSs. For further information on this matter see
“Additional Information—Taxation—Brazilian Tax Considerations”.




**Risk
      Factors**




Before
      making an investment decision, you should consider all of the information set
      forth in this annual report. In particular, you should consider the special
      features applicable to an investment in Brazil and applicable to an investment
      in AmBev, including those set forth below. In general, investing in the
      securities of issuers in emerging market countries, such as Brazil, involves
      a
      higher degree of risk than investing in the securities of issuers in the United
      States.




For
      purposes of this section, when we state that a risk, uncertainty or problem
      may,
      could or would have an “adverse effect” on us, we mean that the risk,
      uncertainty or problem may, could or would have an adverse effect on our
      business, financial condition, liquidity, results of our operations or
      prospects, except as otherwise indicated or as the context may otherwise
      require. You should view similar expressions in this section as having a similar
      meaning.




10




**RISKS
      RELATING TO BRAZIL AND OTHER COUNTRIES IN WHICH WE OPERATE**




**Economic
      uncertainty and volatility in Brazil may adversely affect our
      business**




Our
      most significant market is Brazil, which has periodically experienced extremely
      high rates of inflation. Inflation, along with governmental measures to combat
      inflation and public speculation about possible future measures, has had
      significant negative effects on the Brazilian economy. The annual rates of
      inflation, as measured by the National Consumer Price Index ( *Índice
      Nacional de Preços ao Consumidor* ),
      have
      reached in the not-so-distant past a hyper-inflationary peak of 2,489.1% in
      1993. Brazilian inflation, as measured by the same index, was 14.7% in 2002,
      10.4% in 2003, 6.1% in 2004 and 5.7% in 2005.




Brazil
      may experience high levels of inflation in the future. There can be no assurance
      that recent lower levels of inflation will continue. Future governmental
      actions, including actions to adjust the value of the *real* ,
      may
      trigger increases in inflation. We cannot assure you that inflation will not
      affect our business in the future. In addition, any Brazilian government’s
      actions to maintain economic stability, as well as public speculation about
      possible future actions, may contribute significantly to economic uncertainty
      in
      Brazil and may heighten volatility in the Brazilian securities markets and
      securities issued abroad by Brazilian issuers.




The
      Brazilian currency has devalued constantly during the last four decades.
      Throughout this period, the Brazilian government has implemented various
      economic plans and utilized a number of exchange rate policies, including sudden
      devaluations and periodic mini-devaluations, during which the frequency of
      adjustments has ranged from daily to monthly, floating exchange rate systems,
      exchange controls and dual exchange rate markets. There have been significant
      fluctuations in the exchange rates between Brazilian currency and the U.S.
      dollar and other currencies. For example, the U.S. dollar/ *real* exchange
      rate depreciated from R$ 2.3204 per U.S.$1.00 at December 31, 2001 to R$ 3.5333
      at December 31, 2002. The exchange rate reached R$ 3.9552 per U.S.$1.00 in
      October 2002. However, the *real* has
      appreciated against the U.S. dollar in recent years. The *real* had an
      appreciation of 22.3%, resulting in an exchange rate of R$ 2.8892 per U.S.$1.00
      as of December 31, 2003, an 8.8% appreciation in 2004, resulting in an exchange
      rate of R$ 2.6544 per U.S.$1.00 as of December 31, 2004, and a further 13.4%
      appreciation in 2005, resulting in an exchange rate of R$ 2.3407.




Devaluation
      of the *real* relative
      to the U.S. dollar would create additional inflationary pressures in Brazil
      by
      generally increasing the price of imported products and requiring recessionary
      governmental policies to curb aggregate demand. On the other hand, appreciation
      of the *real* against
      the U.S. dollar may lead to a deterioration of the current account and the
      balance of payments, as well as dampen export-driven growth. The potential
      impact of the floating exchange rate and measures of the Brazilian government
      aimed at stabilizing the *real* is
      uncertain. In addition, a substantial increase in inflation may weaken investor
      confidence in Brazil, impacting our ability to finance our operations through
      the international capital markets.




**Devaluation
      of the** ***real*** **relative to the U.S. dollar may adversely affect our financial
      performance**




Most
      of our sales are in *reais* ;
      however, a significant portion of our debt is denominated in or indexed to
      U.S.
      dollars. In addition, a significant portion of our operating expenses, in
      particular those related to packaging such as aluminum and iron cans and PET
      bottles, as well as sugar, hops and malt are also denominated in or linked
      to
      U.S. dollars. Therefore, the devaluation of the *real* increases our financial expenses and operating costs and could affect our
      ability to meet our foreign currency obligations. Although for the last three
      years the *real* has
      appreciated against the U.S. dollar, we cannot assure you that it will continue
      to do so in the future. Our current policy is to hedge substantially all of
      our
      U.S. dollar-denominated debt against adverse changes in foreign exchange rates;
      however, we cannot assure you that such hedging will be possible at all times
      in
      the future.




**Increases
      in taxes levied on beverage products in Brazil and high levels of tax evasion
      may adversely affect our results and profitability**




Increases
      in Brazil’s already high levels of taxation could adversely affect our
      profitability. Increases in taxes on beverage products usually result in higher
      beverage prices for consumers. Higher beverage prices generally result in lower
      levels of consumption and, therefore, lower net sales. Lower net sales result
      in
      lower margins because some of our costs are fixed and thus do not vary
      significantly based on the level of production. We cannot assure you that the
      government will not increase current tax levels, at both state and/or federal
      levels, and that this will not impact our business.




11




In
      addition, the Brazilian beverage industry experiences high levels of tax
      evasion, which is primarily due to the high level of taxes on beverage products
      in Brazil. An increase in taxes may lead to an increase in tax evasion, which
      could result in unfair pricing practices in the industry. We proposed to the
      federal government regulations requiring the mandatory installation of flow
      meters in all Brazilian beer and soft drinks factories in order to help the
      federal and state governments fight tax evasion in the beverage industry. Though
      the federal government issued this regulation in 2004 with respect to the beer
      industry only, it issued similar regulations with respect to the carbonated
      soft-drinks industry in 2006. We cannot assure you that these regulations will
      have the impact we expect.




**Quinsa
      is subject to substantial risks relating to its business and operations in
      Argentina and other countries in which it operates**




On
      January 31, 2003, we acquired a significant interest in Quinsa and on August
      8,
      2006 we increased a voting interest in Quinsa to aproximatedely 97.18%. Quinsa
      is a brewing company with a substantial portion of its operations in Argentina
      and other South American countries. As a result, Quinsa’s financial conditions
      and results of operations may be adversely affected by the political
      instability, fluctuations in the economy and governmental actions concerning
      the
      economy of Argentina and the other countries in which it operates. For example,
      Argentina has recently experienced political and economic instability.
      Commercial and financial activities were virtually paralyzed in 2002, further
      aggravating the economic recession that precipitated the above-mentioned crisis.
      A widespread recession followed in 2002, including a 10.9% decrease in real
      GDP,
      high unemployment and high inflation, which have led to a reduction of
      disposable income and of wages in real terms and resulted in changes in consumer
      behavior across all class sectors of the Argentine population. Argentina began
      to stabilize in 2003 and continued to exhibit signs of stability in 2004 and
      2005, with real GDP growth at 9.0% for 2004 and 9.2% for 2005, moderate
      inflation and stable peso nominal exchange rate during 2005, with variations
      of
      12.3% and 2.0%, respectively. There was also improvement in the employment
      situation. The unemployment rate reached 10.1% during the fourth quarter of
      2005, compared to 12.1% for the same period in 2004.




Notwithstanding
      the current continued stabilization, the Argentine economic and social situation
      have quickly deteriorated in the past, and may quickly deteriorate in the
      future, and we cannot assure you that the Argentine economy will continue its
      sustained growth. The devaluation of the Argentine peso and the macroeconomic
      conditions prevailing in Argentina could have, and may continue to have, a
      material adverse effect on Quinsa’s, and indirectly on our, results of
      operations.




**U.S.
      investors may not be able to effect service of process upon, or to enforce
      judgments against us**




We
      are organized under the laws of the Federative Republic of Brazil. Substantially
      all of our directors and executive officers and the experts named in this annual
      report are residents of countries other than the United States. All or a
      substantial portion of the assets of such non-U.S. residents and of AmBev are
      located outside the United States. As a result, it may not be possible for
      investors to effect service of process within the United States upon such
      persons or AmBev, or to enforce against them in U.S. courts judgments obtained
      in such courts based upon civil liability provisions of the Federal securities
      laws of the United States or otherwise.




**The
      Brazilian government has exercised, and continues to exercise, significant
      influence over the Brazilian economy; Brazilian economic and political
      conditions have a direct impact on our business**




The
      Brazilian economy has been characterized by significant involvement on the
      part
      of the Brazilian government, which often changes monetary, credit and other
      policies to influence Brazil’s economy. The Brazilian government’s actions to
      control inflation and affect other policies have often involved wage and price
      controls, the Central Bank’s base interest rates, as well as other measures,
      such as the freezing of bank accounts, which occurred in 1990.




12




Actions
      taken by the Brazilian government concerning the economy may have important
      effects on Brazilian corporations and other entities, including AmBev, and
      on
      market conditions and prices of Brazilian securities. Our financial condition
      and results of operations may be adversely affected by the following factors
      and
      the Brazilian government’s response to the following factors:




·
            devaluations
                and other exchange rate movements;·
            inflation;·
            exchange
                control policies;·
            social
                instability;·
            price
                instability;·
            energy
                shortages;·
            interest
                rates;·
            liquidity
                of domestic capital and lending markets;·
            tax
                policy; and·
            other
                political, diplomatic, social and economic developments in or affecting
                Brazil.




**RISKS
      RELATING TO AMBEV**




**We
      are subject to Brazilian and other antitrust regulations**




We
      have a substantial beer market share in Brazil and thus are subject to
      regulation under Brazilian antitrust rules. In addition, in connection with
      the
      combination of Brahma and Antarctica, we entered into a performance agreement
      with the Brazilian antitrust authorities, which required us to comply with
      a
      number of restrictions. We are also party to other antitrust legal proceedings.
      For further information on this matter see “Financial Information—Consolidated
      Financial Statements and Other Financial Information—Legal Proceedings—Antitrust
      matters”. We cannot assure you that Brazilian antitrust regulation will not
      affect our business in the future.




AmBev’s
      participation in the Argentine beer market increased substantially after the
      acquisition of our interest in Quinsa. Quinsa is subject to regulation under
      Argentinean antitrust rules. In addition, AmBev and Quinsa must comply with
      the
      conditions established by the CNDC, in connection with the acquisition of our
      interest in Quinsa. For further information on this matter see “Information on
      the Company—History and Development of the Company—Interest in Quinsa”. We
      cannot assure you that Argentinean antitrust regulation will not affect Quinsa’s
      business in the future, and therefore, impact the benefits that AmBev
      anticipates will be generated from this investment.




**We
      are subject to regulation on alcoholic beverages in the countries in which
      we
      operate**




Our
      business is regulated by federal, state, provincial and local laws and
      regulations regarding such matters as licensing requirements and marketing
      practices and related matters. Recently, certain Brazilian states and
      municipalities in which we operate have enacted legislation restricting the
      hours of operations of certain points of sale, imposing seals on beverage cans,
      prohibiting the sale of alcoholic beverages on highway points of sale and
      prohibiting the sale of soft drinks in schools. In addition, the Brazilian
      Congress is evaluating proposed regulation on the consumption, sales and
      marketing of alcoholic beverages, including beer which, if enacted, may impose
      restrictions on the advertisement of alcoholic beverage products on television
      during specified times of the day and the hours of operation of certain points
      of sale, among other things.




13




These
      restrictions may adversely impact our results of operations. For further
      information, please refer to “Information on the Company—Business
      Overview—Regulation”.




**We
      are subject to more extensive regulations in Canada than in the other countries
      in which we operate**




Our
      North American operations are subject to more extensive regulations than our
      other operations, which may cause us to face unexpected challenges. We cannot
      assure you that problems encountered while dealing with these future changes
      in
      the regulatory environment will not have a material adverse effect on our
      business, financial condition and results of operation in North
      America.




**RISKS
      RELATING TO OUR SECURITIES**




**The
      relative volatility and illiquidity of securities of Brazilian companies may
      substantially limit your ability to sell our securities at the price and time
      you desire**




Investing
      in securities of companies in emerging markets, such as Brazil, involves greater
      risk than investing in securities of companies from more developed countries
      and
      such investments are generally considered speculative in nature.




Brazilian
      investments, such as investments in our securities, are subject to economic
      and
      political risks, involving, among others:




·
            changes
                in the regulatory, tax, economic and political environment that may
                affect
                the ability of investors to receive payment, in whole or in part,
                in
                respect of their investments; and·
            restrictions
                on foreign investment and on repatriation of capital
                invested.




The
      Brazilian securities markets are substantially smaller, less liquid, more
      concentrated and more volatile than major U.S. and European securities markets,
      and are not as highly regulated or supervised as these markets. The relatively
      small market capitalization and illiquidity of the Brazilian securities markets
      may substantially limit your ability to sell the securities at the price and
      time you desire.




**Deterioration
      in economic and market conditions in other emerging market countries may
      adversely affect the market price of AmBev’s securities**




Economic
      and market conditions in other emerging market countries, especially those
      in
      Latin America, influence the market for securities issued by Brazilian companies
      and investors’ perception of economic conditions in Brazil. Past economic crisis
      in emerging markets, such as in Southeast Asia, Russia and Argentina, triggered
      securities market volatility in Brazil and other emerging market countries’
securities markets. In the recent past, Argentina, Venezuela, Uruguay and
      Paraguay experienced a significant economic downturn. The market value of our
      securities may therefore be adversely affected by events occurring outside
      of
      Brazil, especially in other emerging market countries.




**Our
      controlling shareholders are able to determine the outcome of many corporate
      actions without the approval of non-controlling
      shareholders**




The controlling shareholders of AmBev, Interbrew International B.V., and AmBrew
      S.A. (“InBev”), and Fundação Antonio e Helena Zerrenner Instituição Nacional de
      Beneficência (“FAHZ”), together hold approximately 88.4% of AmBev’s common
      shares. In addition, BRC, which is controlled by Messrs. Lemann, Sicupira and
      Telles, is a party, together with the other controlling shareholders of InBev,
      to the InBev Shareholders’ Agreement with respect to 321,712,000 shares of
      InBev, which represent approximately 52.7% of the outstanding capital stock
      of
      InBev.




14




InBev
      holds, directly or indirectly, shares of AmBev common stock that represent
      approximately 72.9% of the total voting power of AmBev’s capital stock. InBev
      thus has control over AmBev, even though (i) InBev remains subject to the AmBev
      shareholders’ agreement with FAHZ and (ii) InBev is jointly controlled by
      Messrs. Lemann, Sicupira and Telles and Interbrew's former controlling
      shareholders. For further information on these matters see “Information on the
      Company—InBev-AmBev Transactions” and “Major Shareholders and Related Party
      Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.




The
      controlling shareholders are able to elect the majority of the members of the
      Board of Directors of AmBev and generally determine the outcome of other actions
      requiring the approval of AmBev’s shareholders. Under Brazilian Corporate Law,
      the protections afforded to non-controlling security holders and the fiduciary
      duties of directors may, in some respects, be less comprehensive than in the
      United States or other jurisdictions.




**AmBev
      shareholders may not receive any dividends**




According
      to its current bylaws, AmBev must generally pay its shareholders 35% of its
      annual net income, as determined and adjusted under Brazilian GAAP (“adjusted
      income”). The main sources for these dividends are AmBev’s operations and
      AmBev’s operating subsidiaries. Adjusted income may be capitalized, used to
      absorb losses or otherwise appropriated as allowed under Brazilian GAAP;
      therefore, adjusted income may not be available to be paid as dividends in
      a
      certain year. AmBev might not pay dividends to its shareholders in any
      particular fiscal year, upon the determination of the Board of Directors that
      such distributions would be inadvisable in view of AmBev’s financial condition.
      While the law does not establish the circumstances rendering the payment of
      dividends inadvisable, it is generally agreed that a company need not pay
      dividends if such payment threatens the existence of the company as a going
      concern or harms its normal course of operations.




It
      is possible, therefore, that shareholders of AmBev will not receive dividends
      in
      any particular fiscal year. Any dividends not distributed would be allocated
      to
      a special reserve account for future payment to shareholders, unless it is
      used
      to offset subsequent losses.




**Controls
      and restrictions on foreign currency remittance could harm the ability of AmBev
      to transfer dividend payments offshore**




Brazilian
      law provides that whenever there is a serious imbalance in Brazil’s balance of
      payments or reasons to foresee a serious imbalance, the Brazilian government
      may
      impose temporary restrictions on the remittance to foreign investors of the
      proceeds of their investments in Brazil. For example, for approximately six
      months in 1989 and early 1990 the Brazilian government froze all dividend and
      capital repatriations that were owed to foreign equity investors and held by
      the
      Central Bank in order to conserve Brazil’s foreign currency reserves. These
      amounts were subsequently released in accordance with Brazilian government
      directives. Similar measures could be taken by the Brazilian government in
      the
      future.




As
      a result, the Brazilian government may in the future restrict companies such
      as
      AmBev from paying amounts denominated in foreign currencies or require that
      any
      such payments be made in Brazilian *reais* .
      The
      likelihood that the Brazilian government would impose such restrictions may
      be
      affected by the extent of Brazil’s foreign currency reserves, the availability
      of foreign currency in the foreign exchange markets on the date a payment is
      due, the size of Brazil’s debt service burden relative to the economy as a
      whole, Brazil’s policy toward the International Monetary Fund and other factors.
      We cannot assure you that the Central Bank will not modify its policies or
      that
      the Brazilian government will not institute restrictions or delays on payments
      by Brazilian issuers in respect of securities issued in the international
      capital markets to date. For further information on this matter see “Key
      Information - Exchange Rate Information - Exchange Controls”.




**If
      you exchange the AmBev ADSs for AmBev shares, you risk losing some foreign
      currency remittance and Brazilian tax advantages**




The
      AmBev ADSs benefit from the foreign capital registration that The Bank of New
      York (as depositary) has in Brazil, which permits The Bank of New York to
      convert dividends and other distributions with respect to the AmBev shares
      into
      foreign currency and remit the proceeds abroad. If you exchange your AmBev
      ADSs
      for AmBev shares, you will be entitled to rely on The Bank of New York’s foreign
      capital registration for only five business days
      from
      the date of exchange. After this five-day period, you will not be able to remit
      abroad non-Brazilian currency unless you obtain your own foreign capital
      registration. In addition, gains with respect to AmBev shares will be subject
      to
      less favorable tax treatment unless you obtain your own certificate of foreign
      capital registration or you obtain your own registration with the Central Bank
      pursuant to Resolution No. 2,689/00 of the National Monetary Council. For a
      more
      complete description of Brazilian restrictions on foreign investments and the
      foreign investment regulations, see “Additional Information—Memorandum and
      Articles of Association—Restrictions on Foreign Investment” and “Key Information
      - Exchange Rate Information —Exchange Controls”. For a more complete description
      of Brazilian tax regulations, see “Additional Information—Taxation—Brazilian Tax
      Considerations”.




15




**AmBev
      ADSs have fewer and less well defined shareholders’ rights as compared to
      shareholders’ rights of similar U.S. companies**




AmBev’s
      corporate affairs are governed by AmBev’s bylaws and Brazilian Corporate Law,
      which may differ from the legal principles that would apply to AmBev if the
      company were incorporated in a jurisdiction in the United States, such as
      Delaware or New York, or in other jurisdictions outside of Brazil. In addition,
      your rights or the rights of holders of the AmBev shares and ADSs under
      Brazilian Corporate Law to protect your interests relative to actions taken
      by
      AmBev’s Board of Directors or controlling shareholders may be fewer and less
      well-defined than under the laws of those other jurisdictions outside of
      Brazil.




Although
      Brazilian law imposes restrictions on insider trading and price manipulation,
      the Brazilian securities markets may not be as highly regulated and supervised
      as the U.S. securities markets or markets in other jurisdictions. In addition,
      rules and policies against self-dealing and regarding the preservation of
      shareholder interests may be less well-defined and enforced in Brazil than
      in
      the United States, potentially causing disadvantages to holders of the AmBev
      shares and ADSs. Corporate disclosures may be less complete or informative
      than
      what may be expected of a U.S. public company.




**Some
      entitlements are not available to U.S. holders of AmBev shares and
      ADSs**




Due
      to various Brazilian and United States laws and regulations, United States
      holders of AmBev shares or ADSs may not be entitled to all of the rights
      possessed by Brazilian holders of AmBev shares. For instance, U.S. holders
      of
      AmBev shares may not be able to exercise any preemptive or preferential rights
      relating to their shares unless a registration statement under the Securities
      Act is effective with respect to such rights or an exemption from the
      registration requirements thereunder is available.




**RISKS
      RELATING TO THE NOTES**




**Possible
      extension of the expected maturity of the notes**




Under
      the terms of the notes and the indenture, if, on the expected maturity date
      for
      the notes, the insurance policy is in effect or certain funds are on deposit
      in
      the reserve account and certain specified events have occurred and are
      continuing relating to the imposition of currency exchange controls in Brazil,
      the date for the repayment of the notes will automatically be extended until
      the
      earlier to occur of: (i) twenty-four calendar months from the expected maturity
      date; (ii) the latest date for which funds are available in the reserve account
      or under the letter of credit and under the insurance policy to pay interest
      on
      the notes or (iii) the thirtieth day after any such currency exchange control
      event has ended. Accordingly, you should not rely, in making your investment
      decision, on receiving repayment in full of the notes on the initial expected
      maturity date.




Any
      such extension of the expected maturity date could, depending on changes in
      the
      financial conditions of AmBev, ultimately affect the ability of the noteholders
      to receive all amounts due to them under such international notes and the
      related international indentures.




16




**Judgments
      of Brazilian courts enforcing our obligations under the notes or the indenture
      would be expressed only in Brazilian currency**




Any
      judgment obtained in a court in Brazil in case judicial proceedings were brought
      in Brazil seeking to enforce our obligations under the notes or the indenture
      would be expressed in Brazilian currency equivalent to the amount of foreign
      currency of such sum at the prevailing exchange rate: (i) at the date in which
      the judicial suit was filed, in which case the inflation adjustment of the
      amount due should be made in accordance with the indexes established by the
      court; or (ii) at the date of the payment, as determined by the court. Upon
      the
      rendering of such a judgment, we would be able to satisfy our obligations (i)
      upon payment in Brazil, in Brazilian currency, or (ii) upon remittance abroad
      of
      the foreign currency equivalent amount to the amount in Brazilian currency
      expressed in said judgment, converted according to the exchange rate prevailing
      at the date of such remittance, subject to the validity of the registration
      of
      the notes with the Brazilian Central Bank.




**Controls
      and restrictions on foreign currency remittance could impede our ability to
      make
      payments under the notes**




Brazilian
      law provides that whenever there is a serious imbalance in Brazil’s balance of
      payments or reasons to foresee a serious imbalance, the Brazilian government
      may
      impose temporary restrictions on the remittance to foreign investors of the
      proceeds of their investments in Brazil. See “—Controls and restrictions on
      foreign currency remittance could harm the ability of AmBev to transfer dividend
      payments offshore”.




We
      cannot assure you that mechanisms for the transfer of *reais* and
      conversion into U.S. dollars will continue to be available at the time we are
      required to perform our obligations under the notes or that a more restrictive
      control policy, which could affect our ability to make payments under the notes
      in U.S. dollars, will not be instituted in the future. If such financial
      mechanisms are not available, we will have to rely on a special authorization
      from the Central Bank to make payments under the notes in U.S. dollars. We
      cannot assure you that any such Central Bank approval would be obtained or
      that
      such approval would be obtained on a timely basis.




In
      the event that no such additional authorizations are obtained or obtainable
      from
      the Central Bank for the payment by AmBev of amounts owed under the indenture
      or
      the notes, as the case may be, AmBev may be able to lawfully pay the amounts
      due
      under the notes through an international transfer of *reais* .
      Through
      the international transfer of *reais* mechanism, payments made in *reais* by AmBev
      will be deposited in non-resident accounts held by AmBev, which would then
      purchase U.S. dollars through the exchange market, as defined in “—Exchange Rate
      Information” and “—Exchange Controls”, and remit U.S. dollars to the relevant
      agent for payment of the notes. No assurance can be given that the international
      transfer of *reais* or the
      exchange market will remain legally or commercially available to Brazilian
      residents.




**Book-entry
      registration**




Because
      transfers and pledges of global notes can be effected only through book entries
      at the Depository Trust Company (“DTC”), the liquidity of any secondary market
      for global notes may be reduced to the extent that some investors are unwilling
      to hold notes in book-entry form in the name of a DTC participant. The ability
      to pledge global notes may be limited due to the lack of a physical certificate.
      Beneficial owners of global notes may, in certain cases, experience delay in
      the
      receipt of payments of principal and interest since such payments will be
      forwarded by the paying agent to DTC who will then forward payment to the
      respective DTC participants, who will thereafter forward payment directly,
      or
      indirectly through Euroclear or Clearstream, to beneficial owners of the global
      notes. In the event of the insolvency of DTC or of a DTC participant in whose
      name global notes are recorded, the ability of beneficial owners to obtain
      timely payment and (if the limits of applicable insurance coverage by the
      Securities Investor Protection Corporation are exceeded, or if such coverage
      is
      otherwise unavailable) ultimate payment of principal and interest on global
      notes may be impaired.




**Subordination
      to certain statutory liabilities**




Under
      Brazilian law, our obligations under the notes and the indenture are
      subordinated to certain statutory preferences. In the event of our bankruptcy,
      and according to the new Brazilian bankruptcy law which became effective on
      June
      9, 2005, such statutory preferences, such as claims for salaries and wages
      (up
      to 150 minimum wages, per plaintiff), social security and other taxes, court
      fees and expenses, will have preference over any other claims, including claims
      by any investor in respect of the notes.




17




**Possible
      voluntary cancellation of the insurance policy and the letter of credit and
      refunding of amounts on deposit in the reserve account**




Subject
      to certain conditions precedent relating to the rating of the notes, AmBev
      may
      request the trustee to cancel the insurance policy, refund all amounts on
      deposit in the reserve account and allow the letter of credit to be cancelled
      after the third anniversary of the closing date. Any such cancellation and
      withdrawal may significantly affect the ability of noteholders to receive
      payments under their notes during a currency exchange control event occurring
      after any such cancellation, withdrawal and refund.




**RISKS
      RELATING TO THE INSURANCE POLICY**




**Limited
      financial information concerning the insurer**




The
      rating of the notes is in part based on the availability of the insurance policy
      to cover certain risks related to inconvertibility or non-transferability of
      amounts which may be paid by the issuer under the indenture and the notes in
      the
      event that the Brazilian government imposes limitations on the conversion of *reais* to U.S.
      dollars. No financial information concerning the insurer is included in this
      annual report and statutory financial statements are available from the Delaware
      insurance authorities. The insurer’s financial obligations are subject to
      pooling arrangements with its parent and certain of its affiliates, which
      arrangements depend on the financial condition of these entities. No financial
      information concerning these entities is included herein. Any decline in the
      financial condition of the insurer or any of these companies may impair the
      ability of the insurer to pay claims under the insurance policy and could result
      in a downgrade of the rating of the notes.




**Limitation
      on amount of coverage under the insurance policy**




The
      insurance policy has a policy payment limit in U.S. dollars which corresponds
      to
      the amount of scheduled interest due on the notes for eighteen months. Combined
      with the amounts on deposit in a reserve account or available under the letter
      of credit, the amounts available to the trustee from the insurance policy should
      be sufficient to cover the payment of interest due on the notes for up to four
      interest payment periods. If for any reason any currency exchange control event
      were to continue for a period longer than twenty-four months (four consecutive
      interest payment periods) during which time AmBev would otherwise be required
      to
      make payments to the trustee on behalf of the noteholders under the notes,
      a
      default may occur on the notes. In such cases, noteholders may, in certain
      circumstances be required to accept *reais* in
      satisfaction of AmBev’s obligation to make payments to the trustee under the
      notes regardless of whether such *reais* are then
      convertible into U.S. dollars or any other currency. See “—Risks Relating to the
      Notes—Judgments of Brazilian courts enforcing our obligations under the notes or
      the indenture would be payable only in *reais* ”.




**Conditional
      nature of the insurer’s obligation to pay under the insurance
      policy**




The
      insurer’s obligation to make payments under the insurance policy is subject to
      certain conditions, limitations and exclusions including, but not limited
      to:




·
            the
                requirement that AmBev generally either attempts and fails to convert*reais*to
                U.S. dollars or attempts and fails to transfer U.S. dollars from
                Brazil to
                the trustee in New York;·
            certain
                events causing the failure of AmBev to pay under the indenture, continuing
                for the entire 180 calendar-day waiting period under the insurance
                policy;·
            the
                filing by the trustee, as the insured party under the insurance policy,
                of
                a claim with the insurer; and·
            the
                provision of certain information by the trustee and AmBev to the
                insurer
                within the time periods proscribed by the insurance policy in connection
                with the filing of the claim with the
                insurer.




18




The
      failure to satisfy any such condition, if not waived by the insurer, may result
      in the insurer not being obligated to make any payment on the insurance
      policy.




In
      addition, the insurer may in certain circumstances cancel the insurance policy,
      exclude the payment of a claim thereunder and adjust the amount of a claim
      under
      the insurance policy.




**Limitation
      on timing of payments under the insurance policy**




The
      insurance policy requires that the insurer make payments in respect of a claim
      thereunder 180 days after the original payment schedule for principal of, and
      interest on, the notes. Accordingly, in the event of an acceleration of the
      notes prior to the maturity thereof during certain events, the insurer will
      not
      be obligated to make such payments in the event of any such
      acceleration.




**Information
      on the Company**




AmBev’s
      principal executive offices are located at Rua Dr. Renato Paes de Barros, 1017,
      4th floor, CEP 04530-001, São Paulo, SP, Brazil, tel.: (5511) 2122-1415, e-mail:
      ir@ambev.com.br.




**History
      and Development of the Company**




***Overview***




Companhia
      de Bebidas das Américas—AmBev is the successor of Companhia Cervejaria Brahma
      (“Brahma”) and Companhia Antarctica Paulista Indústria Brasileira de Bebidas e
      Conexos (“Antarctica”), two of the oldest brewers in Brazil. Antarctica was
      founded in 1885. Brahma was founded in 1888 as Villiger & Cia. The Brahma
      brand was registered on September 6, 1888, and in 1904 Villiger & Cia.
      changed its name to Companhia Cervejaria Brahma.




In
      1997, Brahma acquired Pepsi-Cola Engarrafadora Ltda. and PCE Bebidas Ltda.,
      PepsiCo bottlers in southern and southeastern Brazil, and at the same time
      acquired the exclusive rights to produce, sell and distribute Pepsi soft drink
      products in northeastern Brazil. In 1999, Brahma obtained the exclusive rights
      to produce, sell and distribute Pepsi soft drink products throughout Brazil.




AmBev
      was incorporated as Aditus Participações S.A. (“Aditus”) on September 14, 1998.
      AmBev, a Brazilian sociedade anônima, is a publicly held corporation
      incorporated under the laws of the Federative Republic of Brazil. On July 1,
      1999, the controlling shareholders of Brahma and Antarctica contributed all
      of
      their common and preferred shares in Brahma and Antarctica in exchange for
      shares of the same type and class of AmBev (the “controlling shareholders’
contribution”).




On
      October 9, 2000, following the combination, AmBev entered into a new franchise
      agreement with PepsiCo which terminated the Brahma franchise agreement and
      granted us sole bottler and distributor rights for Pepsi soft drink products
      in
      Brazil. On January 1, 2002, we expanded our partnership with PepsiCo to include
      the production, sale and distribution of *Gatorade* .
      Our
      PepsiCo franchise agreement expires in 2017, and, thereafter, will be
      automatically renewed for additional ten-year terms absent two years’ prior
      notice by either party of its intent not to renew the contract following the
      expiration of the initial or any subsequent term.




On
      March 31, 2001, Brahma was merged into Antarctica, and Antarctica changed its
      name to CBB. These transactions had no effect on AmBev’s consolidated financial
      statements because each of the entities were wholly owned by AmBev.




On
      January 31, 2003, AmBev completed a business combination with Quinsa, through
      which AmBev acquired a 40.5% initial economic interest in Quinsa and established
      a leading presence in the beer markets of Argentina, Bolivia, Paraguay and
      Uruguay.




19




During
      2003 and the first quarter of 2004, AmBev expanded its presence in the north
      of
      Latin America through a series of acquisitions by which it established a
      foothold in several beverage markets, such as Central America, Peru, Ecuador
      and
      the Dominican Republic.




On
      August 27, 2004, AmBev and a Belgian brewer, completed a business combination
      that involved the merger of an indirect holding company of Labatt, one of the
      leading brewers in Canada, into AmBev.  At the same time, controlling
      shareholders of AmBev completed the contribution of all shares of an indirect
      holding company of AmBev to InBev in exchange for newly issued shares of InBev.
      After this transaction, InBev became the majority shareholder of AmBev through
      subsidiaries and holding companies, one of which being InBev Holding Brasil
      S.A.
      (“Inbev Brasil”).




On
      May 31, 2005, CBB merged into AmBev, a transaction which simplified AmBev’s
      corporate structure.




On
      July 28, 2005, InBev Brasil was merged into AmBev. See “Major Shareholders and
      Related Party Transactions -- Material Related Party Transactions - AmBev and
      InBev”.




On
      August 3, 2005, AmBev, BAC and Quinsa entered into an agreement pursuant to
      which Quinsa agreed to acquire BAC’s 5.32% equity interest in Quilmes
      International (Bermuda) Ltd. ("QIB") for approximately U.S.$119million. The
      transaction closed on June 28, 2006. As a result of such transaction, Quinsa
      owns 92.95% of QIB, while AmBev owns the remaining 7.05%. See "Interest in
      Quinsa".




On
      April, 13, 2006, AmBev announced that it has entered into an agreement with
      BAC,
      the controlling shareholder of Quinsa, pursuant to which BAC has agreed to
      sell
      all its remaining shares in Quinsa to AmBev for a total purchase price of
      approximately US$1.2 billion, subject to certain adjustments, including
      dividends and interest.  Upon the closing of the transaction, AmBev’s
      equity interest in Quinsa will increase from 56.72% to 91.18% of its total
      share
      capital. This transaction closed on August 8, 2006 and Ambev paid to BAC U.S.$
      1,252,572,033.




***The
      Brahma-Antarctica Combination—Creation of AmBev and Brazilian Antitrust
      Approval***




*Companhia
      Cervejaria Brahma* (“Brahma”)
      was a company engaged in the production and sale of beverages (primarily beer
      and soft drinks). Brahma was controlled by Messrs. Jorge Paulo Lemann, Marcel
      Herrmann Telles and Carlos Alberto da Veiga Sicupira through certain holding
      companies (the “Braco Group”), who collectively held a 55.1% voting stake in
      Brahma prior to the Brahma-Antarctica transaction. The remaining shares of
      Brahma were publicly held.




*Indústrias
      de Bebidas e Conexos Antarctica Paulista S/A* (“Antarctica”)
      was also a company engaged in the production and sale of beverages, primarily
      beer and soft drinks. Antarctica was controlled by a foundation named *Fundação
      Antônio e Helena Zerrener* (“FAHZ”), which held an 88.1% voting interest in Antarctica before the
      Brahma-Antarctica transaction took place. The remaining shares of Antarctica
      were publicly held.




The
      Brahma-Antarctica transaction consisted of the combination of Brahma and
      Antarctica and was carried out over the course of 1999 and 2000. The combination
      led to the formation of AmBev, a holding company that had Brahma and Antarctica
      as its subsidiaries, and was performed in three steps.




*First* ,
      in July
      1999 the Braco Group and FAHZ contributed their shares in Brahma and Antarctica,
      respectively, to AmBev in exchange for AmBev shares. As a result of such
      contributions, (i) AmBev became the owner of 55.1% of Brahma’s voting shares and
      88.1% of Antarctica’s voting shares, and (ii) the Braco Group and FAHZ each
      owned, respectively, 76% and 24% of AmBev’s voting shares.




*Second,* in
      September 1999, Antarctica’s minority shareholders’ exchanged their shares in
      Antarctica for AmBev shares, causing Antarctica to become a wholly-owned
      subsidiary of AmBev.




*Third* ,
      in
      September 2000, Brahma’s minority shareholders’ exchanged their shares in Brahma
      for AmBev shares, which resulted in Brahma also becoming a wholly-owned
      subsidiary of AmBev.




Brazilian
      antitrust authorities have the power to investigate any transaction that may
      limit or impair competition, or result in a dominant market position, including
      transactions that result in the concentration of a market share equal to or
      greater than 20% of any relevant market or which involves, among other factors,
      any company with annual gross sales of R$ 400 million or more. The transfer
      of
      control of Brahma and Antarctica to AmBev through the controlling shareholders’
contribution resulted in a market share for AmBev as of that date in excess
      of
      70% of the Brazilian beer market and 20% of the Brazilian soft drinks market.
      Brazilian antitrust authorities therefore reviewed the transaction to determine
      whether it would negatively impact competitive conditions in the relevant
      markets, or whether it would negatively affect consumers.




20




CADE,
      an independent agency of the Brazilian Ministry of Justice, is the principal
      Brazilian antitrust authority. On April 7, 2000, CADE approved the controlling
      shareholders’ contribution subject to restrictions designed to prevent AmBev
      from exercising excessive control over the Brazilian beer market. CADE imposed
      no restrictions in connection with soft drinks or other beverages produced
      by
      AmBev. On April 19, 2000, AmBev entered into a performance agreement with CADE
      pursuant to which AmBev agreed to comply with the restrictions imposed by CADE.
      The principal terms of the performance agreement included:




·
            Distribution
                network:
                For a period of four years, we had to share our distribution network
                with
                at least one regional Brazilian beer company, which could not have
                a
                market share in excess of 5% of its respective regional market, in
                each of
                the five regions of Brazil as defined by CADE. On September 10, 2001,
                after a public bidding process, AmBev signed an agreement for the
                sharing
                of AmBev’s distribution network with Eduardo Bier Comercial de Produtos
                Alimentícios (“Dado Bier”);·
            Plants:
                For a period of four years, had AmBev decided to close or dispose
                of any
                of its beer plants, it had to first offer such plant for sale in
                a public
                auction;·
            Dismissals:
                For a period of five years, if AmBev or any of its subsidiaries had
                dismissed any employee as a result of the restructuring process related
                to
                the combination and other than for cause, AmBev had to attempt to
                place
                the employee in a new job, and provide the employee with retraining,
                as
                appropriate;·
            Exclusivity:
                We and our distributors could not demand that points of sale operate
                on an
                exclusive basis, except in certain circumstances, including where
                our
                investments and improvements were equivalent to a significant portion
                of
                the assets of the point of sale; and·
            Bavaria:
                A
                requirement that we sell Antarctica’s Bavaria brand and related
                assets.




On
      November 6, 2000, we entered into an agreement with Molson Inc. (which has
      since
      merged with Adolph Coors Company to form Molson Coors Brewing Company, “Molson”)
      for the sale of Bavaria pursuant to the terms of our performance agreement
      with
      CADE. CADE approved this agreement on December 13, 2000, and the sale was
      completed on December 20, 2000. The agreement also provided for the sharing
      of
      our distribution network for a period of six years, renewable for an additional
      two-year period at the option of the purchaser.




On
      April 30, 2002, Molson decided to terminate the distribution agreement in order
      to enter into a distribution agreement with The Coca-Cola Company.




Non-compliance
      with any obligation under the performance agreement may trigger a minimum daily
      fine of R$ 10.3 thousand per occurrence. This daily fine could be increased
      up
      to a maximum of R$ 206.1 thousand per occurrence. In the event of
      non-compliance, CADE may also appoint a judicial officer to enforce compliance.
      CADE has the authority to revoke its approval of the controlling shareholders’
contribution and to file an administrative proceeding against us if we do not
      comply with our obligations. CADE also has the general authority to order other
      remedial measures as provided by law and as established under the performance
      agreement. Pursuant to the terms of the performance agreement, AmBev has to
      file
      with CADE half yearly reports attesting compliance with its terms and
      conditions. AmBev filed the tenth and last report on August 31, 2005. CADE
      has
      analyzed all reports up to the eighth report and, except for the obligations
      in
      connection with exclusivity agreements and the closure of plants (in connection
      with which further information has been required) all other obligations under
      the agreement have been considered fulfilled up to the date of such
      reports.




21




***Interest
      in Quinsa***




On
      January 31, 2003, AmBev consummated the acquisition of an interest in Quinsa,
      an
      indirect holding company of Cerveceria y Malteria Quilmes, the largest Argentine
      brewer, and in Quilmes International (Bermuda) Ltd. (“QIB”), Quinsa’s controlled
      subsidiary which is the holding company for all Quinsa’s operating subsidiaries.
      Quinsa owned 85% of the economic interest in QIB as of January 31, 2003. This
      transaction involved an initial acquisition of 37.5% of the total capital of
      Quinsa and 8.6% of the shares of QIB, resulting in a total ownership of 40.5%
      of
      Quinsa’s economic interest. The transaction included:




·
            the
                purchase of 230.9 million Class A Quinsa shares from BAC, for R$
                1,222.6
                million (U.S.$346.4 million);·
            the
                contribution of AmBev’s brewery assets located in Argentina, Uruguay and
                Paraguay, with a book value (determined under Brazilian GAAP) of
                R$ 300.7
                million, in exchange for 26.4 million new Class B shares issued by
                Quinsa;
                and·
            the
                purchase of 8.0 million QIB shares from Heineken International Beheer
                B.V.C. (“Heineken”), a subsidiary of Heineken N.V., for R$ 206.5 million
                (U.S.$58.5 million).




During
      2003, we acquired an additional 12.0 million Class B shares of Quinsa in the
      open market for a total consideration of R$ 243.7 million (U.S.$82.7 million),
      increasing our total economic interest in Quinsa to 49.7% at December 31, 2003.
      During 2004 and 2005, Quinsa conducted certain share repurchases pursuant to
      its
      share buyback program, increasing our total economic interest in Quinsa to
      59.2%
      as of December 31, 2005.




AmBev
      and BAC were parties to a shareholders’ agreement whereby each shareholder
      exercised 50% control over the operations of Quinsa. Accordingly, under
      Brazilian GAAP, for the period covered by this annual report, Quinsa is
      proportionally consolidated and under U.S. GAAP, Quinsa is accounted for under
      the equity method.




This
      acquisition granted AmBev access to leading positions in the Argentine,
      Bolivian, Uruguayan and Paraguayan markets, as well as to Quinsa’s operations in
      Chile. In addition, following the acquisition, AmBev has been able to distribute
      the Quilmes brands throughout Brazil. Pursuant to the original agreement with
      BAC, AmBev had a call option to acquire 373.5 million Quinsa Class A Shares
      held
      by BAC in exchange for shares of AmBev, which could have been exercised by
      AmBev
      beginning in April 2009 and in April of each year thereafter. Conversely, BAC
      had a put option to sell to AmBev the 373.5 million Quinsa Class A Shares held
      by BAC in exchange for shares of AmBev, which could have been exercised by
      BAC
      beginning in April 2003 and in April of each year thereafter. We refer to these
      agreements in this annual report as the “Quinsa Put and Call Options”. The price
      of the shares would have been calculated based on the EBITDA of both AmBev
      and
      Quinsa at the time of exchange, as defined in the agreement.




The
      acquisition of AmBev’s interest in Quinsa was approved with certain restrictions
      by the CNDC, the Argentine Antitrust Authority. The main restrictions imposed
      were:




·
            Quinsa
                and AmBev are required to sell the brands Bieckert, Palermo, Imperial
                and
                Norte, as well as the brewery located in Luján, where the Brahma brand was
                produced, to an independent brewery, which must be financially sound
                and
                which does not produce beer in the Argentine Market (the
                “Purchaser”).·
            Quinsa
                and AmBev are required to submit documentation to the CNDC, evidencing
                their commitment to allow the Purchaser, for a period of seven years
                starting on the date of the sale of the assets to the Purchaser,
                to have
                access to Quinsa’s distribution network in Argentina.·
            Quinsa
                and AmBev must commit to produce the Bieckert, Palermo and Imperial
                brands
                in its own plants on behalf of the Purchaser, for a two-year period,
                as
                from the date on which such assets are
                sold.




Companies
      that produce beer in Argentina may not purchase the assets we are required
      to
      sell pursuant to the CNDC’s decision. In February 2003, a subsidiary of Compañía
      Cervecerías Unidas S.A. (“CCU”) filed a lawsuit to be able to participate in any
      such sale and our compliance with the restrictions was suspended until a final
      decision was issued by the Supreme Court. The Supreme Court rejected CCU’s claim
      in February 28, 2006 and since April 4, 2006 we are able to sell the assets
      pursuant to the CNDC decision.




22




In
      April 2006, AmBev agreed to acquire BAC’s remaining shares in Quinsa for a total
      purchase price of approximately US$1.2 billion, subject to certain adjustments,
      including dividends and interest. The acquisition was financed through a mix
      of
      internal and external sources, a combination of cash flow and the issuance
      of
      debt in the local market. The closing of the transaction was subject to
      customary conditions precedent, including any required regulatory approvals.
      Upon the closing of the transaction,which took place on August 8, 2006, AmBev’s
      equity interest in Quinsa increased from 56.72% to 91.18% of its total share
      capital. The adjusted purchase price was US$ 1,252,572,033.




The
      transaction was ratified by AmBev’s shareholders in a meeting held on June 27,
      2006.




***Expansion
      into the North of Latin America***




During
      2003 and the first quarter of 2004, we extended our presence in Latin America
      through a series of transactions in the northern region of the
      continent.




*Central
      America*




On
      October 24, 2002, AmBev and The Central America Bottling Corporation
      (“CabCorp”), PepsiCo’s anchor bottler in Central America, agreed to establish a
      50-50 joint venture company to explore the beer markets in Central America
      and
      the Caribbean. The joint venture, AmBevCentroAmerica, built a brewing facility
      in 2003 in the region of Tecolután, Guatemala. AmBevCentroAmerica started to
      produce beer in September 2003, when the Brahva brand, an extension of AmBev’s
      Brahma brand, was launched in Guatemala. In 2004, the sales of Brahva were
      extended to Nicaragua and, in the beginning of 2005, to El Salvador. Brahva
      is
      sold in these three countries through CabCorp’s distribution
      network.




*Peru*




On
      October 14, 2003, we agreed to purchase, through our Peruvian subsidiary
      AmBevPerú, certain production and distribution assets from Embotelladora Rivera,
      including two soft drinks bottling plants, for a consideration of R$ 86.7
      million. Among the assets acquired were the franchise for Pepsi products in
      Lima
      and northern Peru. In connection with our expansion in Peru, in May 2005 we
      finalized a brewing and soft drinks bottling facility in the region of Lima,
      with an estimated investment of approximately R$ 92.1 million, and we launched
      the Brahma brand in the local market.




On
      March 8, 2006, AmBev entered into an agreement for the sale of 25% of the
      capital stock of its Peruvian subsidiary AmBevPerú to Ransa Comercial S.A., a
      company of the Romero business group (“Romero Group”). The Romero Group is a
      Peruvian business group that is active in several segments of the Peruvian
      economy, including the food industry, logistics and financial services. The
      agreement was concluded on July 17, 2006 at an amount of approximately US$
      3.7
      million.




*Ecuador*




On
      December 2, 2003, we acquired 80% of the voting rights and economic interest
      of
      Cerveceria Suramericana in Ecuador, the owner of a brewing facility in the
      city
      of Guayaquil, with an annual production capacity of 900,000 hectoliters. This
      company was valued at an amount equivalent to its existing debt (approximately
      U.S.$45 million), and was renamed AmBevEcuador. In October 2004, we launched
      the
      Brahma brand in the local market.




*Dominican
      Republic*




On
      February 12, 2004, we acquired a 51.0% voting and economic interest in
      Embotelladora Dominicana, C. per A. (“Embodom”), PepsiCo’s bottler for the
      Dominican Republic, for U.S.$60.0 million. AmBev’s stake reached 66.0% by the
      end of 2005 through an asset contribution to Embodom consisting of U.S.$10
      million and a brewing facility in the region of Santo Domingo, which started
      operations in August 2005.




23




***InBev-AmBev
      Transactions***




The
      “InBev-AmBev transactions” consisted of two transactions negotiated
      simultaneously: (i) in the first transaction, the Braco Group exchanged its
      AmBev shares for shares in Interbrew S.A./N.V. (“Interbrew”); and (ii) in the
      second transaction, AmBev issued shares to Interbrew in exchange for Interbrew’s
      100% stake in Labatt Brewing Company Ltd. (“Labatt”).




*Ownership
      of AmBev and Interbrew prior to the InBev-AmBev transactions*




*AmBev*




*Immediately
      prior to the InBev-AmBev transactions, AmBev was a public company traded on
      the
      São Paulo Stock Exchange and on the New York Stock Exchange, controlled by the
      Braco Group and the FAHZ in accordance with the terms of the AmBev Shareholders’
Agreement. The Braco Group held approximately 53% of AmBev’s common shares while
      FAHZ owned approximately 24% of AmBev’s common shares. The remaining 23% of
      AmBev’s common shares were publicly held.*




*Interbrew*




Interbrew
      was also a public company listed on Euronext — Brussels, and was controlled by
      Stichting Interbrew (the “Stichting”), which owned approximately 64% of
      Interbrew’s common shares. Two charitable foundations Fund Voorzitter Verhelst
      and the Fund InBev-Baillet Latour (the “InBev Foundations”) owned approximately
      2% of Interbrew’s common shares. The remainder of Interbrew’s common shares were
      held in the market. The Stichting represented the interests of the Interbrew
      Founding Families. Interbrew owned, through certain holding companies, 100%
      of
      Labatt.




*Exchange
      of shares between Braco Group and Interbrew Founding Families*




In
      March 2004, various entities controlled by the Braco Group entered into an
      agreement (the “Contribution and Subscription Agreement”) with Interbrew and
      various entities representing the interests of the Interbrew Founding Families
      to exchange their controlling interest in AmBev for newly-issued voting shares
      of Interbrew, which represented 24.7% of Interbrew’s voting shares.




Upon
      closing of this transaction in August 2004, (i) the Braco Group received
      approximately 44% of the voting interest in the Stichting, which thereupon
      owned
      approximately 56% of Interbrew’s common shares, and (ii) Interbrew received
      approximately a 53% voting interest and a 22% economic interest in AmBev. Such
      voting interest was subject to the pre-existing AmBev Shareholders’ Agreement,
      as amended in connection with the InBev-AmBev transactions. In addition,
      Interbrew was renamed InBev S.A./N.V. (“InBev”).




***Acquisition
      of Labatt***




Also
      in March 2004, AmBev entered into an agreement (the “ *Incorporação* Agreement”) through which an indirect holding company of Labatt would be merged
      into AmBev. As consideration for the acquisition of Labatt, AmBev issued AmBev
      common and preferred shares to Interbrew.




With
      the consummation of this transaction also in August 2004, (i) Labatt became
      a
      wholly-owned subsidiary of AmBev, and (ii) Interbrew increased its stake in
      AmBev to approximately 68% of common shares and 34% of preferred
      shares.




24




*Ownership
      structure of InBev and AmBev upon consummation of the InBev-AmBev
      transactions*




*InBev*




With
      the closing of the InBev-AmBev transactions, 56% of InBev’s voting shares were
      owned by the Stichting, 1% was owned by the InBev Foundations, 17% were owned
      directly by entities and individuals associated with the Interbrew Founding
      Families and the remaining 26% constituted the public float.




The
      Braco Group became the holder of 44% of the Stichting’s voting interests, while
      the Interbrew Founding Families held the remaining 56% of the Stichting’s voting
      interests. In addition, the Braco Group and entities representing the interests
      of the Interbrew Founding Families entered into a shareholders’ agreement (the
“InBev Shareholders’ Agreement”) providing for, among other things, joint and
      equal influence over the exercise of the Stichting voting rights in
      InBev.




*AmBev*




With
      the closing of the InBev-AmBev transactions, InBev became the owner of
      approximately 68% of AmBev’s voting shares, FAHZ retained approximately 16% of
      such shares, and the remaining 15% were held by the public.




**Mandatory
      Tender Offer**




Pursuant
      to Brazilian corporate law, InBev was required to conduct, following the
      consummation of the InBev-AmBev transactions, a mandatory tender offer (the
      “MTO”) for all remaining outstanding common shares of AmBev. The MTO was
      completed in March 2005, and InBev acquired an additional 2,960,070,177 AmBev
      common shares, increasing its stake in AmBev to approximately an 81% voting
      interest and a 56% economic interest.




FAHZ
      did not tender its AmBev shares in the MTO.




**AmBev
      common stock dividend**




The
      subsequent change to AmBev’s ownership structure resulted from the payment by
      AmBev of a common stock dividend in May 2005. Pursuant to the stock dividend
      transaction, AmBev increased its capital by 10,941,151 thousand common shares
      and paid a stock dividend to its shareholders of one common share for each
      5
      shares owned (preferred or common). After the stock dividend was paid, InBev’s
      voting interest in AmBev decreased to approximately 73%, FAHZ’s voting stake
      decreased to approximately 13.5% and the voting interest held by AmBev’s public
      shareholders increased to approximately 13.5%.




*InBev
      Shareholders’ Agreement*




According
      to publicly available information, we understand that, in connection with the
      Contribution and Subscription Agreement, on March 2, 2004, BRC, EPS, an
      affiliate of EPS, Rayvax Société d’Investissements S.A.  (“Rayvax”) and
      Stichting entered into a shareholders agreement (the “InBev Shareholders’
Agreement”) that became effective on August 27, 2004. The InBev Shareholders’
Agreement provides for BRC and EPS to hold their interests in InBev through
      Stichting and addresses, among other things, certain matters relating to the
      governance and management of Stichting and InBev as well as the transfers of
      interests in InBev. On August 27, 2004, BRC transferred all 141,712,000 of
      its
      InBev shares to Stichting in exchange for 141,712,000 Stichting certificates,
      and EPS held 180,000,000 Stichting certificates (representing 180,000,000
      million InBev shares). As of December 31, 2004, the 321,712,000 InBev shares
      held by Stichting represented 55.8% of all issued and outstanding InBev shares
      at that time. Pursuant to the terms of the InBev Shareholders’ Agreement, BRC
      and EPS will jointly and equally exercise control over Stichting and the InBev
      shares held by Stichting.




The
      InBev Shareholders’ Agreement provides for restrictions on the ability of BRC
      and EPS to transfer their Stichting certificates (and consequently their InBev
      shares held through Stichting). EPS has agreed that it will at all times hold,
      directly or indirectly, no less than 180,000,000 Stichting certificates
      (representing 180,000,000 InBev shares), and BRC has agreed that it will at
      all
      times hold, directly or indirectly, no less than 141,712,000 Stichting
      certificates (representing 141,712,000 InBev shares). In addition, the InBev
      Shareholders’ Agreement requires certain affiliates of EPS whose InBev shares
      are not held through Stichting to vote their InBev shares in the same manner
      as
      the InBev shares held by Stichting and will restrict such affiliates’ ability to
      transfer their InBev shares in a manner that would disrupt the orderly trading
      of the InBev shares. In addition, under the InBev Shareholders’ Agreement, EPS
      and BRC agreed not to acquire any shares of capital stock of AmBev, subject
      to
      limited exceptions. The InBev Shareholders’ Agreement will remain in effect for
      an initial term of 20 years from August 27, 2004. Thereafter, the InBev
      Shareholders’ Agreement will be automatically renewed for successive renewal
      terms of 10 years each unless, not later than two years prior to the expiration
      of the initial or any renewal term, either BRC or EPS notifies the other of
      its
      intention to terminate the agreement.




25




***Investment
      Grade Status***




In
      December 2004, Standard & Poor’s raised AmBev’s risk rating denominated in
      foreign currency from BB- to BBB-, three levels above the Brazilian government’s
      sovereign risk. In January 2006, Fitch also raised AmBev’s risk rating in
      foreign currency to BBB-, making AmBev the first Brazilian company to receive
      such ratings from Standard & Poor’s and Fitch.




***Merger
      of CBB into AmBev***




On
      May 31, 2005, in order to simplify AmBev’s corporate structure, CBB merged into
      AmBev. AmBev held 99.99% of CBB, and issued 26,585 new AmBev common shares
      to
      CBB minority shareholders, representing an increase in AmBev’s shareholders’
equity of approximately R$ 4.0 thousand.




***Merger
      of InBev Brasil into AmBev***




On
      July 28, 2005, InBev Brasil was merged into AmBev. See “Major Shareholders and
      Related Party Transactions -- Material Related Party Transactions - AmBev and
      InBev”.




**Business
      Overview**




***Description
      of the Company***




We
      are the largest brewer in Latin America in terms of sales volumes and the fifth
      largest beer producer in the world, according to our estimates. We produce,
      distribute and sell beer, soft drinks and other non-alcoholic and non-carbonated
      products in 14 countries across the Americas. We are PepsiCo’s largest bottler
      outside the United States.




We
      conduct our operations through three business units:




·
            Brazil,
                which includes three divisions: (i) beer sales (“Beer Brazil”); (ii)
                carbonated soft drinks and non-alcoholic non-carbonated sales (“CSD &
                NANC”); and (iii) sales of malt and by-products to third parties (“Other
                Products”);·
            Hispanic
                Latin America (“HILA”), which includes AmBev’s stake in Quinsa, and the
                operations of our subsidiaries in the Dominican Republic, Ecuador,
                Guatemala (which also serves Nicaragua and El Salvador), Peru and
                Venezuela. We refer to our HILA operations, excluding Quinsa and
                its
                subsidiaries, as “HILA-ex”; and·
            North
                America, represented by Labatt’s operations, which includes domestic sales
                in Canada and beer exports to the United States. The following map
                illustrates the main locations where our business units
                operate:




26




The
      following table presents a breakdown of our net revenues by business
      division:




**Net
                Proceeds****Year
                ended December 31,****2005**
            
            
            **2004**
            
            
            **2003****Brazil**
            
            
            **9,902.8**
            
            
            62.1
            %
            
            **8,525.9**
            
            
            71.0
            %
            
            **7,637.7**
            
            
            88.0
            %Beer
                Brazil
            
            
            8,119.1
            
            
            51.0
            %
            
            6,907.4
            
            
            57.5
            %
            
            6,114.6
            
            
            70.5
            %CSD
                & NANC
            
            
            1,648.7
            
            
            10.3
            %
            
            1,462.8
            
            
            12.2
            %
            
            1,332.1
            
            
            15.3
            %Other
                Products
            
            
            135.0
            
            
            0.8
            %
            
            155.8
            
            
            1.3
            %
            
            190.9
            
            
            2.2
            %**HILA**
            
            
            **2,080.3**
            
            
            13.0
            %
            
            **1,922.1**
            
            
            16.0
            %
            
            **1,046.1**
            
            
            12.0
            %Quinsa(1)
            
            
            1,299.9
            
            
            8.1
            %
            
            1,153.0
            
            
            9.6
            %
            
            773.7
            
            
            8.9
            %HILA-ex
            
            
            780.4
            
            
            4.9
            %
            
            769.1
            
            
            6.4
            %
            
            272.4
            
            
            3.1
            %**North
                America(2)**
            
            
            **3,975.5**
            
            
            24.9
            %
            
            **1,558.8**
            
            
            13.0
            %
            
            **—**
            
            
            **—****AmBev
                Consolidated**
            
            
            **15,958.6**
            
            
            100.0
            %
            
            **12,006.8**
            
            
            100.0
            %
            
            **8,683.8**
            
            
            100.0
            %





(1)
            Quinsa’s
                net revenues in proportion to AmBev’s economic stake in
                Quinsa.(2)
            Consists
                of the results of Labatt’s operations from August 27, 2004 through
                December 31, 2005.*Source*:
                AmBev




27




The
      following table presents a breakdown of AmBev’s sales volumes by business
      division:




**Sales
                Volumes****Year
                ended December 31,****2005**
            
            
            **2004**
            
            
            **2003****Brazil**
            
            
            **82,743.1**
            
            
            66.0
            %
            
            **76,884.9**
            
            
            70.7
            %
            
            **74,058.4**
            
            
            78.5
            %Beer
                Brazil
            
            
            62,486.4
            
            
            49.9
            %
            
            57,776.8
            
            
            53.1
            %
            
            55,260.2
            
            
            58.6
            %CSD
                & NANC
            
            
            20,256.7
            
            
            16.1
            %
            
            19,108.2
            
            
            17.6
            %
            
            18,798.3
            
            
            19.9
            %Other
                Products
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —**HILA**
            
            
            **31,678.6**
            
            
            25.3
            %
            
            **28,333.2**
            
            
            26.0
            %
            
            **20,301.3**
            
            
            21.5
            %Quinsa(1)
            
            
            24,997.5
            
            
            19.9
            %
            
            22,145.9
            
            
            20.3
            %
            
            18,514.6
            
            
            19.6
            %HILA-ex
            
            
            6,681.1
            
            
            5.4
            %
            
            6,187.2
            
            
            5.7
            %
            
            1,786.7
            
            
            1.9
            %**North
                America****(2)**
            
            
            **10,891.6**
            
            
            8.7
            %
            
            **3,621.3**
            
            
            3.3
            %
            
            —
            
            
            **—****AmBev
                Consolidated**
            
            
            **125,313.3**
            
            
            100.0
            %
            
            **108,839.4**
            
            
            100.0
            %
            
            **94,359.7**
            
            
            100.0
            %





(1)
            Includes
                100% of the sales volumes of Quinsa.(2)
            Consists
                of the results of Labatt’s operations from August 27, 2004 through
                December 31, 2005.*Source*:
                AmBev




***Business
      Strategy***




We
      aim to continuously improve economic value. Based on this strategy our main
      drivers are:




·
            our
                people and culture;·
            top
                line growth;·
            distribution
                efficiency and execution;·
            permanent
                cost and expense reduction; and·
            financial
                discipline.




*Our
      People and Culture*




We
      are aware of the value and importance of highly qualified, motivated and
      committed employees. We carefully manage our hiring and training process with
      a
      view to maintaining outstanding professionals among our ranks.  In
      addition, we believe that we have created through our compensation program,
      which is based on both variable payment and stock ownership, financial
      incentives for high performance and results. See “Directors, Senior Management
      and Employees - Compensation - Profit-Sharing Plan”.




Another
      core element of our culture is our distinguished managerial capabilities, which
      is summarized by: (i) hardworking ethos; (ii) results focused evaluations;
      (iii)
      the encouragement of our executives to act as owners, not only managers; (iv)
      leadership through personal example and (v) appreciation for field
      experience.




*Top
      Line Growth*




We
      are constantly seeking sustainable growth in our net revenues, primarily through
      four different initiatives:




·
            *Portfolio
                management*:
                we constantly pursue increased sales of premium, higher-priced and
                more
                profitable products in our sales mix;·
            *Maximize
                share of consumer expenditure*:
                we seek to maximize our share of the consumer’s expenditure in our
                products;·
            *Market
                share*:
                we are committed to maintaining and strengthening our leading position
                in
                the markets where we operate, as well as to evaluating opportunities
                to
                establish a presence in new markets across the Americas where we
                currently
                do not operate; and·
            *Increase
                per capita consumption*:
                based on proprietary research focused on consumer behavior and occasions
                of consumption, we aim to increase per capita consumption in the
                markets
                where we operate.




28




*Distribution
      Efficiency and Execution*




Delivering
      national beer brands to almost one million points of sale is a very complex
      feature of our business. In recent years, we have been focusing on direct
      distribution in major cities while still strengthening our third-party
      distribution system. In Brazil, for instance, instead of operating three
      inherited, parallel, single-brand systems (each of them dedicated to one of
      our
      major brands, *Skol* , *Brahma* and *Antarctica* ),
      we are
      shifting towards a multi-brand network of distributors committed to handling
      all
      of our brands.




In
      addition, we are constantly seeking to improve our point of sale execution
      through new and creative measures. One of our key marketing initiatives was
      the
      introduction into the Brazilian market of our custom-made beer refrigerators
      designed and built to chill beer at the optimal temperature for on-premise
      consumption. These refrigerators also work as effective marketing tools, as
      they
      are decorated with images related to our core brands.




*Permanent
      Cost and Expense Reduction*




Cost
      and expense control is one of our employees’ top priorities. Each of our
      departments must comply with its respective annual budget for fixed costs;
      the
      employees of those departments which exceed the budget are not entitled to
      bonuses.




As
      a measure to avoid unnecessary expenses, we have designed a management control
      system inspired in zero-base budgeting procedures. That system demands that
      every manager builds the annual budget for his or her respective department
      from
      scratch.




*Financial
      Discipline*




We
      have a policy of not retaining unnecessary cash. Through a combination of
      dividends and share buy-backs, we have returned to our shareholders the cash
      flow generated by our operations, after allocating funds for our operational
      needs and investment plans.




***Seasonality***




Sales
      of beverages in our markets are seasonal. Generally, sales are stronger during
      the summer and major holidays in the regions. Therefore, in the Southern
      Hemisphere (Brazil and HILA) volumes are usually stronger in the fourth quarter
      due to early summer and year-end festivities. In North America, volumes are
      stronger in the second and third quarters due to the summer season. This is
      demonstrated by the table below, which sets forth our volumes by quarter and
      business division:




29




**2005
                Quarterly Volumes**
              ***(As
                a percentage of annual volumes)*****1st
                Quarter**
            
            
            **2nd
                Quarter**
            
            
            **3rd
                Quarter**
            
            
            **4th
                Quarter**
            
            
            **2005****Brazil**
            
            
            23.8
            %
            
            22.2
            %
            
            23.2
            %
            
            30.8
            %
            
            100.0
            %Beer
                Brazil
            
            
            23.9
            %
            
            22.2
            %
            
            23.2
            %
            
            30.7
            %
            
            100.0
            %CSD
                & NANC
            
            
            23.5
            %
            
            22.2
            %
            
            23.2
            %
            
            31.1
            %
            
            100.0
            %**HILA**
            
            
            26.4
            %
            
            19.6
            %
            
            22.0
            %
            
            32.0
            %
            
            100.0
            %Quinsa
            
            
            27.4
            %
            
            18.8
            %
            
            21.1
            %
            
            32.7
            %
            
            100.0
            %HILA-ex
            
            
            22.5
            %
            
            22.7
            %
            
            25.1
            %
            
            29.7
            %
            
            100.0
            %**North
                America**
            
            
            18.7
            %
            
            28.5
            %
            
            28.5
            %
            
            24.3
            %
            
            100.0
            %**AmBev
                Consolidated**
            
            
            24.0
            %
            
            22.1
            %
            
            23.3
            %
            
            30.6
            %
            
            100.0
            %




***Description
      of The Markets Where We Operate***




*Brazil*




The
      Brazilian beer market




In
      2005, Brazil was the world’s third largest beer market in terms of volume,
      reaching 93.2 million hectoliters, according to Euromonitor. Beer is
      predominantly sold in bars for on-premise consumption, in standardized,
      returnable 600 milliliter glass bottles. The second most important packaging
      presentation is the 350 milliliter one-way aluminum can, which is predominantly
      sold in supermarkets for off-premise consumption.




As
      of May 2006, according to ACNielsen, we had a 68.8% market share in terms of
      beer sales volumes, mainly through our three major brands, *Skol* , *Brahma* and *Antarctica* .
      Our
      closest competitors in Brazil are: Grupo Schincariol with a 12.5% market share;
      Femsa with a 7.6% market share; and Cervejaria Petrópolis S/A with a 6.5% market
      share in May 2006, according to ACNielsen.




Distribution
      represents an important feature in this market, as the retail channel is
      fragmented into almost one million points of sale. Our distribution is
      structured under two separate branches. One of them is our network of exclusive
      third-party distributors, involving more than 250 operators. The other branch
      is
      our proprietary direct distribution system, involving more than 40 distribution
      centers spanned over most regions of Brazil. We have been focusing on direct
      distribution in large urban regions, while still strengthening our third-party
      distribution system. See “Business Overview - Business Strategy”.




The
      Brazilian soft drinks market




The
      soft drinks market in Brazil is comprised of many different segments, including
      carbonated soft drinks (“CSD”), bottled water, isotonics and iced teas. The CSD
      segment is the most relevant one for us, representing more than 90% of the
      profits of our CSD & NANC business unit. We also sell isotonics, iced tea
      and bottled water.




The
      main flavors of soft drink in Brazil are (i) black cola, (ii) guaraná, (iii)
      orange, and (iv) lime. Most of the carbonated soft drinks in Brazil are sold
      in
      supermarkets in 2-liter one-way PET bottles, for off-premise consumption.
      Specifically for our portfolio, the 350 milliliter one-way aluminum can is
      also
      an important packaging presentation, and is mainly sold in
      supermarkets.




Our
      main competitor in this market is The Coca Cola Company, which operates in
      Brazil through approximately 20 bottlers. As of May 2006, according to
      ACNielsen, The Coca Cola Company family of brands had a 54.6% market share
      in
      the Brazilian soft drinks market, while we had a market share of 16.8%. Apart
      from The Coca Cola Company, we face competition from small regional producers
      that produce what is usually referred to as “B Brands”. The B Brands compete
      mainly in price, usually being sold at a significantly lower price than our
      products.




30






Our
      main CSD brands are *Guaraná
      Antarctica* ,
      the
      leader in the guaraná flavor segment, and *Pepsi
      Cola* ,
      which
      is sold under license from PepsiCo. We also have in our portfolio the brands *Gatorade* ,
      in the
      isotonics market, and *Lipton
      Ice Tea* ,
      in the
      iced tea market, which are also sold under license.




Our
      CSD & NANC products are sold through the same distribution system used for
      beer.




*HILA*




Quinsa




A
      description of the beer and soft drink markets in the regions where Quinsa
      operates can be found in Quinsa’s annual report on Form 20-F, which will be
      filed with the Securities and Exchange Commission. Please refer to that
      description for an understanding of the Quinsa market.




HILA-ex




**Central
      America (including Guatemala, El Salvador and Nicaragua)**




According
      to Euromonitor, the beer markets in Central America where we operate had
      combined annual sales volume of 2.6 million hectoliters in 2005. In these
      markets, beer is predominantly sold in returnable bottles in small retail
      stores.




In
      El Salvador, the main packaging presentation is the returnable, 12 oz. glass
      bottle. Our main competitor in El Salvador is the market leader, a local
      subsidiary of SAB Miller.




In
      Guatemala, the main packaging presentation is the returnable, 12 oz. glass
      bottle. Our main competitor in Guatemala is Cerveceria Centro Americana, the
      market leader. Cerveceria Centro Americana is a private company held by local
      investors.




In
      Nicaragua, the main packaging presentation is the returnable, 1.0 liter glass
      bottle. Our main competitor  in Nicaragua is the market leader, which is a
      joint venture among Guatemala’s Cerveceria Centro Americana and a Costa Rican
      investor’s group named Florida Ice & Farm.




In
      all three of these markets we sell our *Brahva* brand,
      which is distributed through CabCorp’s distribution system, jointly with
      CabCorp’s soft drinks portfolio.




**The
      Dominican Republic**




The
      Dominican beer market




According
      to Euromonitor, the Dominican beer market annual sales volume is estimated
      at
      3.1 million hectoliters in 2005. The main packaging presentation in that country
      is the returnable, 650 milliliter glass bottle, which is predominantly sold
      in
      small retail stores. Currently, the market leader is Cerveceria Presidente,
      which is a joint venture among local investors and a subsidiary of the Altria
      Group, Inc.




In
      connection with our expansion in the Dominican CSD market, we built a brewing
      and soft drinks bottling facility in the region of Santo Domingo, which started
      operations in August 2005. We sell beer in the Dominican Republic through the
      same distribution system used in the CSD business.




The
      Dominican CSD market




According
      to our estimates, the Dominican CSD market annual sales volume was 2.1 million
      hectoliters in 2005. The main packaging presentation is the returnable,
      half-liter glass bottle, which is predominantly sold in small retail stores.
      We
      are the leading player in that market, and compete with The Coca Cola Company,
      represented by its local bottler.




31




We
      entered the Dominican CSD market in February 2004 through the acquisition of
      a
      controlling stake in Embodom, PepsiCo’s Dominican Republic bottler. Our main
      brands in that country are *Red
      Rock* , *Pepsi
      Cola* and *Seven
      UP* (all of
      which are marketed under license from PepsiCo).




Our
      distribution system in the Dominican Republic is comprised of direct
      distribution operations and third-party distributors.




**Ecuador**




According
      to Euromonitor, the Ecuadorian beer market annual sales volume is estimated
      at
      2.6 million hectoliters in 2005. The main packaging presentation in that country
      is the returnable, 578 milliliter glass bottle, predominantly sold in small
      retail stores. The leading player in that market is SAB Miller.




We
      entered the Ecuadorian beer market through the acquisition of Cerveceria
      Suramericana in December 2003, which had by that time less than 5% market share
      through its own *Biela* brand.
      In October 2004, *Biela* brand
      was discontinued and we launched the *Brahma* brand in
      Ecuador.




Our
      distribution system in Ecuador is comprised of direct distribution operations
      and third-party distributors.




In
      2004, we entered into a legal dispute with Grupo Empresarial Bavaria (now SAB
      Miller), claiming the right to use common-shaped returnable beer bottles (578
      milliliters) that are widely available in the local market.  The purpose of
      the dispute is to allow full interchangeability between our bottles and those
      carried by other market players. Ecuadorian courts have not yet reached a final
      decision on this matter, and we cannot anticipate when the dispute will be
      resolved.  We currently use a proprietary returnable beer bottle (578
      milliliters) in Ecuador.




**Peru**




The
      Peruvian beer market




According
      to Euromonitor, the Peruvian beer market annual sales volume is estimated at
      7.1
      million hectoliters in 2005. The main packaging presentation in that country
      is
      the returnable, 620 milliliter glass bottle, which is predominantly sold in
      small retail stores. The market leader is SAB Miller.




In
      connection with our expansion in the Peruvian CSD market, we finalized in May
      2005 a brewing and soft drinks bottling facility in the region of Lima, which
      allowed us to start selling the *Brahma* beer
      brand in that country.




The
      same distribution system used in Peru for our CSD business is also used for
      the
      beer sales.




In
      2004, we entered into a legal dispute with Grupo Empresarial Bavaria (now SAB
      Miller), claiming the right to use common-shaped returnable beer bottles (620
      milliliters) that are widely available in the local market.  The purpose of
      the dispute is to allow full interchangeability between our bottles and those
      carried by other market players.  Peruvian courts have not yet reached a
      final decision on this matter, and we cannot anticipate when the dispute will
      be
      resolved.  We currently use proprietary 630 milliliter and 1.1 liter
      returnable beer bottles in Peru.




The
      Peruvian CSD market




According
      to our estimates, the Peruvian CSD market annual sales volume was 12.2 million
      hectoliters in 2005. The main packaging presentation in the country is the
      3.0
      liter one-way PET bottle, which is predominantly sold in small retail stores.
      The leading player in that market is The Coca Cola Company, represented by
      its
      local network of bottlers. We also face competition from small regional
      producers that produce what is usually referred to as “B Brands”. The B Brands
      compete mainly in price, usually being sold for a significantly lower price
      than
      our products.




32




We
      entered the Peruvian CSD market in November 2003 through the acquisition of
      certain production and distribution assets from Embotelladora Rivera, including
      the PepsiCo franchise for the region of Lima and northern Peru. The main brands
      that we sell in Peru are *Concordia* , *Pepsi
      Cola* and *Triple
      Kola* ,
      all of
      which are sold under license from PepsiCo.




Our
      distribution system in Peru is comprised of direct distribution operations
      and
      third-party distributors.




**Venezuela**




According
      to Euromonitor, the Venezuelan beer market annual sales volume is estimated
      at
      22.0 million hectoliters in 2005. The main packaging presentation in that
      country is the returnable, 222 milliliter glass bottle, which is predominantly
      sold in small retail stores. We compete in Venezuela with Cerveceria Polar,
      the
      market leader, and Cerveceria Regional, the second largest player.




Our
      main brands in Venezuela are *Brahma
      Chopp* and *Brahma
      Light* ,
      and our
      distribution system is comprised of direct distribution operations and
      third-party distributors.




*North
      America*




Our
      North America business unit is represented by Labatt’s operations, which include
      domestic beer sales in Canada and exports of Canadian brands to the United
      States.




According
      to Euromonitor, the annual sales volume in the beer market in Canada is
      estimated at 28.2 million hectoliters in 2005. The main packaging presentation
      in that country is the returnable, 341 milliliter glass bottle, which is
      predominantly sold in privately owned and government owned retail stores. Our
      main competitor in Canada is Molson, which has a market share similar to ours
      (approximately 41.0%). We also compete with smaller local brewers, such as
      Sleeman Breweries Ltd. (“Sleeman”), Moosehead Breweries Ltd. and Lakeport
      Brewing Corporation.




Our
      main brands in Canada are *Budweiser* and *Bud
      Light* (brewed
      and sold under license from Anheuser-Busch, Inc.) (“Anheuser-Busch”), *Labatt
      Blue* , *Alexander
      Keith’s* and *Kokanee* .
      Our
      distribution system is structured in different ways across the
      country:




Distribution
      in Ontario




In
      Ontario, the province with the largest beer consumption in Canada, we own in
      partnership with Molson and Sleeman a distribution and retail company named
      Brewers Retail Inc., the retail component of which carries out business as
      The
      Beer Store (“TBS”). TBS and the Liquor Control Board of Ontario, a chain of
      liquor stores owned by the government of the Province of Ontario (“LCBO”), own
      the exclusive rights to sell beer for off-premise consumption in Ontario. TBS
      also has the exclusive rights to supply domestic-produced beer to the
      LCBO.




Domestic
      brewers are entitled to hire the distribution and retail services of TBS, which
      charges a one-off fee for the registration of each stock keeping unit in its
      portfolio, plus a fee for service for each case delivered to the LCBO or sold
      in
      its proprietary stores.




TBS
      also serves points of sale in Ontario where beer is consumed on premise; there
      are, however, no rights for exclusive supply. Any brewer can sell its products
      directly to points of sale where beer is consumed on premise.




AmBev,
      Molson and Sleeman share all the seats on the board of TBS, with AmBev and
      Molson jointly controlling its operations.




Distribution
      in Quebec




Quebec
      is the province in Canada with the second largest beer consumption. In this
      province there are no exclusive rights for the sales of beer, and both the
      on-premise and off-premise sales channels are mostly comprised of privately
      owned stores. The SAQ, a government-operated liquor store, sells a select few
      beer brands that are not available in the private retail system.




33




We
      (as well as our competitors) sell our products in Quebec through a direct sales
      system.




Distribution
      in the Western Provinces




In
      the Western Provinces (including Alberta, British Columbia, Manitoba,
      Saskatchewan, the Yukon and the Northwest Territories), we and Molson own a
      joint-venture company that distributes our and Molson’s products to the retail
      stores. In Alberta, some volume is also sold through a third-party wholesaler.
      In these Western Provincial markets there are both private (Alberta, British
      Columbia) and government-controlled retail stores (British Columbia, Manitoba,
      Saskatchewan).




Distribution
      in the Atlantic Provinces




We
      distribute and sell our products in the Atlantic Provinces (including New
      Brunswick, Newfoundland, Nova Scotia and Prince Edward Island) through
      distribution and retail networks controlled by the government.




Exports
      to the United States




We
      sell some of our brands in the United States, including *Labatt
      Blue* and *Kokanee* ,
      through
      InBev USA (previously Labatt USA, L.L.C.), a subsidiary of InBev. See “Major
      Shareholders — Material Related Party Transactions”.




***Beer
      and Soft Drink Production Process***




Beer
      production involves several raw material and production stages. The main
      ingredient in beer is malt, which is produced by germinating and roasting barley
      in a process called “malting”. Malt is mixed with water, hops and adjuncts (corn
      syrup, grits or rice, for instance) in the proportions necessary to obtain
      the
      desired taste. The resulting mixture is called “wort”. Wort is fermented with
      selected yeasts to produce beer, which is then filtered and bottled. In addition
      to these inputs, delivery of the product to consumers requires packaging such
      as
      bottles, aluminum or steel cans, labels and crown caps.




Soft
      drinks are produced by mixing water, flavored concentrate and sugar or
      sweetener. Water is processed to eliminate mineral salts and filtered to
      eliminate impurities. Purified water is combined with processed sugar or, in
      the
      case of diet soft drinks, with artificial sweeteners, and concentrate. Carbon
      dioxide gas is injected into the mixture to produce carbonation. Immediately
      following carbonation, the mixture is bottled. In addition to these inputs,
      delivery of the product to consumers requires packaging such as PET bottles,
      aluminum or steel cans, labels and plastic closures.




For
      information on our production facilities, see “— Property, Plant and
      Equipment”.




*Sources
      and Availability of Raw Materials*




*Beer*




The
      main raw materials used in our production are malting barley, malt, grits,
      corn
      syrup, rice, hops and water.




Barley
      and malt




Malt
      is widely available and our requirements are met by domestic and international
      suppliers as well as our own malting facilities. In the case of our beer
      operations in Brazil, over half of our malt needs are supplied by our own
      malting facilities located in the south of Brazil, Argentina and Uruguay.




34




Our
      most significant malt suppliers are Canada Malting, Soufflet, Boortmalt and
      Malterias Unidas. Market prices for malt are volatile, and depend on the quality
      and the level of production of the barley crop across the world, as well as
      on
      the intensity of demand.




We
      purchase barley for our malting facilities directly from farmers resident in
      Brazil, Argentina and Uruguay. Barley prices depends on the quality of the
      barley crop and on the prices for wheat on the main boards of trade across
      the
      world.




Hops




There
      are two types of hops used in our beer production: hops used to give beer its
      distinctive bitter flavor, which we generally import from the United States,
      and
      hops used to give beer its distinctive aroma, which we generally import from
      Europe. The supply of hops is concentrated by few international companies,
      namely the Barth-Haas Group, Yakima Chief, Inc., Hopsteiner and HVG
      Hopfenverwertungsgenossenschaft. There are generally several suppliers available
      to meet our needs.




Adjuncts




Corn
      syrup, gritz and rice are purchased locally by each one of our operations and
      are generally widely available.




Water




Water
      represents a small portion of our raw material costs. We obtain our water
      requirements from several sources, such as: lakes and reservoirs, deep wells
      located near our breweries, rivers adjoining our plants and public utilities
      companies. We monitor the quality, taste and composition of the water we use,
      and treat it to remove impurities and to comply with our high quality standards
      and applicable regulations. As a result of advances in technology, we have
      continuously reduced our water consumption per hectoliter produced. We do not
      foresee any shortage in our current water supply.




*Soft
      drinks*




The
      main raw materials used in our production are: concentrate (including guaraná
extract), sugar, sweetener, water and carbon dioxide gas. Most of these
      materials are obtained from local suppliers.




Guaraná
      fruit




We
      have a 505 hectare farm that provides us with 50 to 60 tons of guaraná berries
      per year, or about 18% of our requirements, with the remainder purchased
      directly from independent farmers in the Amazon region.




Concentrates




We
      have a concentrate facility in the north of Brazil which produces the
      concentrates to meet our requirements for the production of our proprietary
      brands. The concentrate for Pepsi soft drink products is purchased from
      PepsiCo.




Sugar




Sugar
      is widely available and is purchased locally by each of our operations. We
      enter
      into derivative instruments to avoid the impact of short-term volatility in
      sugar prices on our production costs. See “Quantitative and Qualitative
      Disclosure about Market Risk”.




Other




We
      produce all of the fruit juice, pulp and concentrate that we use in the
      manufacture of our fruit-flavored soft drinks.




35




***Packaging***




Packaging
      costs are comprised of the cost of glass and PET bottles, aluminum and steel
      cans, plastic film (shrink and stretch), paper labels, plastic closures, metal
      crowns and paperboard. We enter into derivative instruments to avoid the impact
      of short-term volatility in aluminum prices on our production costs; for further
      information on this matter see “Quantitative and Qualitative Disclosures About
      Market Risk”. For other materials, we usually set a fixed price for the period
      in accordance with the prevailing macroeconomic conditions.




We
      are currently studying the viability of investing in the construction of a
      glass
      bottle producing facility. It is too early to predict the results of such a
      viability study.




Our
      main can suppliers are Rexam, Latapack Ball, Metalic and Crown-Cork. We
      generally purchase all of the glass bottles used in the packaging of our
      products from St. Gobain Emballage, Owens-Illinois Glass Containers and
      Companhia Industrial de Vidros. We obtain the labels for our beer and soft
      drink
      primarily from local suppliers; in Brazil, the majority of our requirements
      are
      met by a printing house that belongs to FAHZ. Plastic closures are principally
      purchased from Alcoa Aluminio and Crown-Cork. PET pre-forms are principally
      purchased from Amcor. Crown caps are sourced locally by each of our operations.
      In Brazil and some of our HILA-ex operations, a significant part of our crown
      caps requirements are met by our facility in the north of Brazil.




***Regulation***




All
      our operations are subject to local governmental regulation and supervision,
      including (i) labor laws; (ii) social security laws; (iii) public health,
      consumer protection and environmental laws; (iv) securities laws; and (v)
      antitrust laws. In addition, regulations exist to (i) ensure healthy and safe
      conditions in facilities for the production, bottling, and distribution of
      beverages and (ii) place restrictions on beer consumption.




Environmental
      laws in the countries where we operate are mostly related to (i) the conformity
      of our operating procedures with environmental standards regarding, among other
      issues, the emission of gas and liquid effluents and (ii) the disposal of
      one-way packaging.




Governmental
      restrictions on beer consumption in the markets where we operate vary from
      one
      country to another, and in some instances, from one local region to another.
      The
      most relevant restrictions are:




·
            Each
                country has a minimum legal drinking age that is established by the
                government; the legal drinking age varies from 18 to 21
                years.·
            Some
                local and federal governments require that retail stores own special
                licenses for the sale of alcohol; this is the case in Venezuela,
                some
                regions of Argentina and Canada.·
            Some
                local governments in Canada establish a minimum price for beer sales,
                which is named Social Reference Price (“SRP”). There is a specific SRP for
                each different packaging presentation. The SRP may vary from one
                province
                to another.·
            Beer
                sales in the off-premise channel in the Canadian provinces of New
                Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and
                Saskatchewan are restricted to specific government-owned
                stores.·
            Beer
                sales in the off-premise channel in Canada in the Province of Ontario
                are
                restricted to two chains of retail stores. One of them is the LCBO,
                which
                is government owned, and the other is TBS, jointly owned by AmBev,
                Molson
                and Sleeman. The Alcohol and Gaming Commission of Ontario regulates
                the
                alcohol industry and recently the Government of Ontario has established
                an
                independent panel to review beverage alcohol policies in Ontario,
                and as
                part of this exercise The Beer Store is undergoing heightened government
                scrutiny.  It is difficult to determine the approach that the
                Government of Ontario will take.




36




Many
      governments also impose restrictions on beer advertisement, which may affect,
      among other issues, (i) the media channels used, (ii) the contents of
      advertising campaigns; and (iii) the time and places where beer can be
      advertised.




***Marketing***




AmBev’s
      marketing initiatives are concentrated in off-trade and on-trade
      initiatives.




*Off-trade
      initiatives*




Off-trade
      initiatives comprise mass media vehicles, such as television, radio, magazines
      and internet websites.




*On-trade
      initiatives*




On trade initiatives includes banners, and all types of enhancements to the
      point of sale, such as branded coolers and decorated furniture.




***Licenses***




AmBev
      entered into long-term agreements with PepsiCo whereby AmBev was granted the
      exclusive right to bottle, sell and distribute certain brands of PepsiCo’s
      portfolio of soft drinks in Brazil, including *Pepsi
      Cola* , *Seven
      Up* and *Gatorade* .
      The
      agreements will expire on December 31, 2017.  See “Additional
      Information—Material Contracts”.  AmBev also has agreements with PepsiCo to
      manufacture, package, sell, distribute and market some of its brands in the
      Dominican Republic and in some regions of Peru, including the north and the
      Lima
      regions. Through Quinsa, AmBev is also PepsiCo’s bottler for Argentina and
      Uruguay.




In
      2005, sales volumes of PepsiCo products represented 37.2% of total CSD &
NANC sales volumes in Brazil, 64.8% of total CSD & NANC sales volumes in the
      Dominican Republic and all of CSD & NANC sales volumes in Peru.




Effective
      January 1, 1998, Labatt entered into long-term licensing agreements with
      Anheuser-Busch whereby Labatt was granted the exclusive right and license to
      manufacture, package, sell, distribute and market some of Anheuser-Busch’s
      brands, including the *Budweiser* and *Bud
      Light* brands,
      in Canada, including the right to use Anheuser-Busch’s trademarks for those
      purposes. The agreements expire January 1, 2098 and are renewable by either
      party for a second term of 100 years.




In
      2005, the Anheuser-Busch brands sold by Labatt represented 34.7% of Labatt’s
      total sales volumes. According to AmBev’s estimates, the *Budweiser* brand is
      currently the largest selling brand in terms of volume in Canada.




On
      March 21, 2005, AmBev and InBev entered into a 10-year cross-licensing agreement
      through which AmBev is allowed to produce, package, market and distribute beer
      under the brands *Stella
      Artois* and *Beck’s* in Latin
      America (except Argentina and Cuba) on an exclusive basis, and InBev is allowed
      to produce, package, market and distribute beer under the brand *Brahma* in
      Europe, Asia, Africa, Cuba and the United States on an exclusive basis. Since
      March 23, 2005, InBev has launched the *Brahma* brand in
      the United States and in a number of European countries such as the United
      Kingdom, France, the Benelux, Ukraine and Russia. We announced the launch of
      the *Stella
      Artois* brand in
      Brazil on June 28, 2005. Labatt and InBev have an arrangement through which
      Labatt distributes *Stella
      Artois* branded
      beer in Canada. In addition, InBev distributes *Labatt Blue, Blue Light, Blue Dry, Labatt Canadian Ale and
      Kokanee* in the
      U.S, under a distribution agreement entered into with Labatt.




37




***Taxation***




*Beer*




Taxation
      on beer in the countries where we operate is comprised of different taxes
      specific to each jurisdiction, such as an excise tax and a value-added tax.
      The
      amount of sales taxes charged on our beer products in 2005 represented as a
      percentage of gross sales was: 35.8% in Brazil; 24.8% in Canada; 17.4% in
      Central America; 27.0% in Ecuador; 39.8% in Peru; 37.0% in the Dominican
      Republic and 22.2% in Venezuela. A description of taxation on beer in the
      markets where Quinsa operates can be found in Quinsa’s annual report on Form
      20-F, which will be filed with the Securities and Exchange Commission. Please
      refer to that description for an understanding of the Quinsa
      market.




*CSD
      & NANC*




Taxation
      on CSD & NANC in the countries where we operate is comprised of taxes
      specific to each jurisdiction, such as an excise tax and a value-added tax.
      The
      amount of sales taxes charged on our CSD & NANC products in 2005 represented
      as a percentage of gross sales was: 27.4% in Brazil; 11.8% in the Dominican
      Republic; and 21.6% in Peru. A description of taxation on CSD & NANC in the
      markets where Quinsa operates can be found in Quinsa’s annual report on Form
      20-F, which will be filed with the Securities and Exchange Commission. Please
      refer to that description for an understanding of the Quinsa
      market.




**Organizational
      Structure**




AmBev
      is 56.1% owned by InBev, and is part of the InBev group of companies. InBev
      is
      currently the world’s largest platform for beer sales, and AmBev is in charge of
      operations in South, Central and North America (excluding Cuba and the United
      States).




Since
      the merger of CBB into AmBev on May 31, 2005, AmBev conducts the bulk of its
      operations in Brazil directly. It is also the indirect holding company for
      Labatt, the operations of HILA-ex and our stake in Quinsa and QIB. The following
      chart illustrates the ownership structure of AmBev’s principal subsidiaries as
      of May 31, 2006 on total share capital owned. The table below does not reflect
      AmBev’s increased interest in Quinsa as a result of the closing of the purchase
      of BAC’s shares in Quinsa. For a list of our material subsidiaries, see Exhibit
      8.1 to this annual report.




38




**Property,
      Plant and Equipment**




Our
      properties consist primarily of brewing, malting, bottling, distribution and
      office facilities in Argentina, Brazil, Canada, the Dominican Republic, Ecuador,
      Guatemala (from which we also serve the beer markets of El Salvador and
      Nicaragua), Peru, Uruguay, Venezuela and Quinsa’s brewing, malting, bottling,
      distribution and office facilities in Argentina, Bolivia, Paraguay and Uruguay.
      In May 2005, our beer plant in the metropolitan region of Lima, Peru, started
      operations, and in August 2005, the beer plant in the Dominican Republic started
      operations. Additionally, in 2005 we closed one brewery in New Westminster,
      British Columbia, Canada, and we have announced the closing of our brewery
      in
      Toronto, Ontario, Canada.




In 2005, our aggregate beer and soft drink production capacity was 164.3 million
      hectoliters per year. Our total annual beer production capacity was 121.9
      million hectoliters. Our total soft drink production capacity was 42.4 million
      hectoliters. In 2005, the production of these facilities totaled 76.7 million
      hectoliters for beer and 23.6 million hectoliters for soft drink. These figures
      do not include facilities operated by Quinsa.




The
      following is a list of our principal production facilities, excluding facilities
      operated by Quinsa (a list of Quinsa's facilities can be found in Quinsa's
      annual report on Form 20-F, which will be filed with the Securities and Exchange
      Commission):




**Brazil**
            
            **HILA-ex**
            
            **North
                America****Plant**
            
            **Type**
              **of
                Plant**
            
            **Plant**
            
            **Type**
              **of
                Plant**
            
            **Plant**
            
            **Type**
              **of
                Plant**Agudos,
                São Paulo
            
            Beer
            
            CACN,
                Venezuela
            
            Beer
            
            St.
                John’s
            
            BeerBrasília,
                Federal District
            
            Beer
            
            Cerveceria
                Rio, Guatemala
            
            Beer
            
            Halifax
            
            BeerCuritiba,
                Paraná
            
            Beer
            
            Cerveceria
                Suramericana, Ecuador
            
            Beer
            
            Montreal
            
            BeerAstra,
                Maranhão
            
            Beer
            
            Hato
                Nuevo, Dominican Republic
            
            Beer
            
            London
            
            BeerGoiânia,
                Goiás
            
            Beer
            
            Santo
                Domingo, Dominican, Republic
            
            Soft
                Drinks
            
            Edmonton
            
            BeerJacareí,
                São Paulo
            
            Beer
            
            Sullana,
                Peru
            
            Soft
                Drinks
            
            Creston
            
            BeerLages,
                Santa Catarina
            
            Beer
            
            Lima,
                Peru
            
            MixedNatal,
                Rio Grande do Norte
            
            Beer
            
            Cympay,
                Uruguay
            
            MaltGuarulhos,
                São Paulo
            
            Beer
            
            MUSA,
                Uruguay
            
            MaltÁguas
                Claras, Sergipe
            
            Mixed
            
            Maltería
                Pampa, Argentina
            
            MaltAquiraz,
                Ceará
            
            MixedCamaçari,
                Bahia
            
            MixedCebrasa,
                Goiás
            
            MixedCuiabá,
                Mato Grosso
            
            MixedJaguariúna,
                São Paulo
            
            MixedJoão
                Pessoa, Paraíba
            
            MixedNordeste,
                Pernambuco
            
            MixedNova
                Rio, Rio de Janeiro
            
            MixedManaus,
                Amazonas
            
            MixedMinas,
                Minas Gerais
            
            MixedTeresina,
                Piauí
            
            MixedÁguas
                Claras do Sul, Rio Grande do Sul
            
            MixedCuritibana,
                Paraná
            
            Soft
                drinksContagem,
                Minas Gerais
            
            Soft
                drinksJundiaí,
                São Paulo
            
            Soft
                drinksSapucaia,
                Rio Grande do Sul
            
            Soft
                drinksManaus,
                Amazonas
            
            Crown
                CapManaus,
                Amazonas
            
            ConcentrateMaltaria
                Navegantes, Rio Grande do Sul
            
            Malt




39




**Operating
      and Financial Review and Prospects**




**Operating
      Results**




**Introduction**




The
      following management’s discussion and analysis of financial condition and
      results of operations should be read in conjunction with our audited financial
      statements included in this annual report. This annual report contains
      forward-looking statements that involve risks and uncertainties. Our actual
      results may differ materially from those discussed in the forward-looking
      statements as a result of various factors including, without limitation, those
      set forth in “Cautionary Statement Regarding Forward-Looking Information” and
      the matters set forth in this annual report generally.




We
      have prepared our audited consolidated financial statements included in this
      annual report in Brazilian *reais* in
      accordance with Brazilian GAAP, which differs in certain significant respects
      from U.S. GAAP. The audited financial statements included elsewhere in this
      annual report include a reconciliation of net income and shareholders’ equity to
      U.S. GAAP, a discussion of the reconciling differences in accounting principles,
      and the presentation of the U.S. GAAP condensed balance sheets and statements
      of
      operations in Brazilian *reais* .




AmBev’s
      discussion and analysis of its financial condition and results of operations
      are
      based upon its primary financial statements. As a result, the financial
      information and related discussion and analysis contained in this Item are
      in
      accordance with Brazilian GAAP and figures are in *reais* ,
      unless
      otherwise stated.




**Critical
      Accounting Policies**




The
      SEC has defined a critical accounting policy as a policy for which there is
      a
      choice among alternatives available under U.S. Generally Accepted Accounting
      Principles, and for which choosing a legitimate alternative would yield
      materially different results. We believe that the following are our critical
      accounting policies. We consider an accounting policy to be critical if it
      is
      important to our financial condition and results of operations and requires
      significant or complex judgments and estimates on the part of our management.
      For a summary of all of our significant accounting policies, see Note 2 to
      our
      consolidated financial statements included herewith.




***Accounting
      for Business combinations and Impairment of Goodwill and Intangible
      Assets***




We
      have made acquisitions that included a significant amount of goodwill and other
      intangible assets, including the acquisition of Labatt and of Quinsa.




Under
      Brazilian GAAP, goodwill is the difference between the purchase consideration
      and the book value of the net assets acquired. Intangible assets are not
      separately recognized. Goodwill is amortized over defined finite periods, as
      disclosed in Note 2(k) to our financial statements, and tested for impairment
      when an event or change in circumstances indicate that the book value of the
      investment will not be recoverable.




Under
      U.S. GAAP, goodwill is calculated as the difference between the purchase
      consideration and the fair value of the net assets acquired. SFAS No. 142,
      “Goodwill and Other Intangible Assets,” became effective for acquisitions after
      June 30, 2001. This standard requires that goodwill no longer be amortized
      but
      tested annually for impairment, and we therefore ceased to amortize goodwill
      as
      from January 1, 2002. Our intangible assets with definite useful lives continue
      to be amortized over the estimated useful lives of these assets.




40






We
      test our goodwill and other long-lived assets for impairment annually or
      whenever events and circumstances indicate that the undiscounted cash flows
      estimated to be generated by those assets are less than the carrying amount
      of
      those items. Our cash flow estimates are based on historical results adjusted
      to
      reflect our best estimate of future market and operating conditions. Our
      estimates of fair values used to determine the resulting impairment loss, if
      any, represent our best estimate based on forecasted cash flows, industry trends
      and reference to market rates and transactions. Impairments can also occur
      when
      we decide to dispose of assets.




***Pension
      and other Post-Retirement Benefits***




We
      account for all benefit obligations provided by us, including those in relation
      to FAHZ and Labatt, in accordance with the IBRACON Accounting Standard and
      Procedure NPC No. 26, “Pensions and Post-retirement benefits”. This standard
      requires the comprehensive recording of pension obligations and expenses on
      an
      actuarial basis. We recognize in our income a charge to pensions and
      post-retirement benefits to reflect the change in the actuarial obligation,
      less
      the fair value of plan assets and the effect of deferrals.




Plan
      assets of the AmBev Pension Fund (“IAPP”) include amounts contributed by AmBev
      and its employees and amounts earned from investing the contributions, less
      benefits paid. Although the plan assets of IAPP are considered to be in excess
      of that required to meet the projected benefit obligation, because Brazilian
      pension regulations currently provide no means for returning this surplus to
      the
      sponsor, a valuation allowance of R$ 240.3 million in 2005, R$ 195.2 million
      in
      2004 and R$ 167.1 million in 2003 was recorded against the excess plan assets
      based on the amount AmBev will be able to reduce future employer contributions
      to the minimum permitted by law.




Under
      U.S. GAAP, we account for pension and other post-retirement benefits in
      accordance with SFAS No. 87 “Employer’s Accounting for Pensions” and SFAS No.
      106 “Employees Accounting for Post-retirement Benefits and Other Obligations”.
      We have recorded an accrued liability, based on independent actuarial reports
      at
      the end of each period which include the pension and other post-retirement
      obligations payable by AmBev, Labatt and the FAHZ.




We
      do not record a valuation allowance on the pension plan assets of IAPP as it
      is
      not appropriate as confirmed by the AICPA International Practices Task Force
      on
      November 25, 2002.




We
      use several statistical data and other factors which attempt to anticipate
      future events in calculating the expense and liability related to our pension
      and employee benefit plans. These factors include assumptions about the discount
      rate, expected return on plan assets and rate of future compensation increases
      as determined by us, within certain guidelines. In addition, our actuarial
      consultants also use subjective factors, such as withdrawal, turnover and
      mortality rates. The actuarial assumptions we use may differ materially from
      our
      actual results, due to changing market and economic conditions, regulatory
      events, judicial rulings, higher or lower withdrawal rates or longer or shorter
      life spans of participants.




***FAHZ
      Net Assets***




FAHZ,
      one of AmBev’s controlling shareholders, provides medical, dental, educational
      and social assistance to our current and retired employees, as well as their
      beneficiaries and dependents, as discussed in Note 15 (c) to the audited
      financial statements included elsewhere in this report. As of December 31,
      2005,
      FAHZ owned 15.2% of AmBev’s outstanding voting shares and 8.2% of AmBev’s total
      outstanding shares. See “Major Shareholders and Related Party Transactions”.




Under
      Brazilian GAAP, FAHZ is a legally distinct entity and we do not include the
      assets and liabilities of FAHZ within our financial statements.




Under
      U.S. GAAP, the net assets of FAHZ are included in the determination of
      shareholders’ equity and net income of AmBev, as such assets are not considered
      to be plan assets as defined by SFAS No. 106, “Employers’ Accounting for
      Post-retirement Benefits Other than Pensions”, since they are not segregated and
      restricted between active and retired employees. The AmBev shares held by FAHZ
      are accounted for as treasury shares and impact our Earnings per share
      calculation as they reduce our outstanding number of shares. We believe no
      alternative recognition and accounting methods are available to us.




41




***Contingencies***




The
      preparation of our financial statements requires our management to make
      estimates and assumptions regarding contingencies which affect the valuation
      of
      assets and liabilities at the date of the financial statements and the revenues
      and expenses during the reported period.




We
      disclose material contingent liabilities unless the possibility of any loss
      arising is considered remote, and material contingent assets where the inflow
      of
      economic benefits is probable. We discuss our material contingencies in Note
      13
      to our financial statements.




Under
      both Brazilian GAAP and U.S. GAAP, we record a provision for a loss contingency
      when it is probable that a future event will confirm that a liability has been
      incurred at the date of the financial statements, and the amount of the loss
      can
      be reasonably estimated. In particular, given the uncertain nature of Brazilian
      tax legislation, the assessment of potential tax liabilities requires
      significant management judgment. By their nature contingencies will only be
      resolved when one or more future events occur or fail to occur - and typically
      those events will occur a number of years in the future.




Total
      provision for contingencies recorded in our balance sheet as at December 31,
      2005 and 2004 totaled R$ 1,128.2 million and R$ 1,242.9 million, respectively.




We
      have estimated the total exposures of possible losses, which are not recorded
      as
      liabilities, to be R$ 4,557.0 million at December 31, 2005 (R$ 1,241.1 million
      -
      2004).




***Deferred
      tax***




We
      recognize deferred tax effects of tax loss carryfowards and temporary
      differences between the financial statement carrying amounts and the tax basis
      of our assets and liabilities. We estimate our income taxes based on regulations
      in the various jurisdictions where we conduct business. This requires us to
      estimate our actual current tax exposure and to assess temporary differences
      that result from different treatment of certain items for tax and accounting
      purposes. These differences result in deferred tax assets and liabilities,
      which
      we record on our consolidated balance sheet We regularly review the deferred
      tax
      assets for recoverability and will only recognize these if we believe that
      it is
      probable (under Brazilian GAAP) or more likely than not (under U.S. GAAP) that
      there will be sufficient taxable profit against any temporary differences that
      can be utilized, based on historical taxable income, projected future taxable
      income, and the expected timing of the reversals of existing temporary
      differences. Pursuant to CVM regulations, under Brazilian GAAP, we must
      demonstrate that we will recover the tax assets discounted to present value
      based on expected realization dates, within a 10-year period, even though these
      credits have no prescription period for Brazilian tax law purposes.




In
      the event we or one of our subsidiaries operate at a loss or are unable to
      generate sufficient future taxable income, or if there is a material change
      in
      the actual effective tax rates or time period within which the underlying
      temporary differences become taxable or deductible, we evaluate the need to
      establish a valuation allowance against all or a significant portion of our
      deferred tax assets resulting in an increase in our effective tax rate.




We
      do not record deferred tax liabilities on the earnings generated by our foreign
      subsidiaries. Based on the advice of external counsel, we concluded that these
      earnings are not taxable on remittance to Brazil. The Brazilian fiscal
      authorities introduced new legislation in the third quarter of 2001 to, among
      other measures, subject offshore earnings to income tax in Brazil from December
      31, 2002, regardless of whether earnings have been remitted to Brazil. Although
      we have received a number of assessments in connection with such matter, as
      described under "—off-Balance Arrangements", we continue to believe that the
      current tax initiatives that we are undertaking will not result in taxes on
      these earnings, based on the advice of external counsel and we have not
      therefore recorded a liability for such taxes in our financial
      statements.




42




Certain
      other tax assets arising from the Brazilian GAAP purchase accounting adjustments
      at the time of the Brahma and Antarctica combination and the subsequent
      downstream merger of Antarctica have not been recorded as recovery is not
      presently considered probable.




***Accounting
      for derivatives***




We
      enter into foreign currency forward, swap and future contract agreements
      (principally for U.S. dollars) to mitigate foreign exchange risk on U.S.
      dollar-denominated debt, financing of imports and payables to foreign suppliers.




These
      agreements are marked-to-market and recorded at the lower of cost plus interest
      and market value. The unrealized gains and losses on these financial instruments
      are reported in the statement of operations and included in “Financial income”
and “Financial expenses”.




Brazilian
      GAAP requires us to disclose the fair value of financial instruments at the
      balance sheet date but does not require us to record the unrealized
      marked-to-market fair value gains in income in the year.




Under
      Brazilian GAAP, financial instruments designated as hedges for accounting
      purposes are recorded at cost plus accrued interest (“yield curve”) and gains or
      losses are deferred and recorded in income when the underlying transaction
      has
      occurred. Financial instrument which have not been designated as hedges for
      accounting purposes are recorded at the lower of cost or market and recorded
      in
      earnings as financial income or expenses when incurred.




Under
      U.S. GAAP, all derivative financial instrument agreements not designated as
      hedges are marked-to-market and the realized and unrealized gains and losses
      on
      these financial instruments used to manage foreign currency exposures are
      reported in the statement of operations and included in “Financial income” and
“Financial expenses”. Financial instruments designated as hedges are accounted
      the same as Brazilian GAAP.




The
      estimated fair value amounts have been determined by the Company using available
      market information and appropriate valuation methodologies. However,
      considerable judgment is necessarily required in interpreting market data to
      develop the estimates of fair value.




The
      Company believes that swap quotations obtained are reasonable when compared
      with
      information on similar financial instruments traded in the Bolsa de Mercadorias
      & Futuros (“BM&F”) and that the internally developed valuation
      methodology is consistent with methodologies used by other participants in
      the
      swap market in Brazil and its results reasonably reflect the amount that would
      be paid or received to settle the swap on the valuation date.




Although
      the Company’s intention is to maintain these instruments through maturity, they
      may be realized at the Company’s discretion. Should these instruments be settled
      only on their respective maturity dates, any effect between the market value
      and
      estimated yield curve of the instruments would be totally eliminated. Had the
      Company been able to adopt the same criterion to recognize its financial
      liabilities at market value, it would have recorded an additional loss, before
      income taxes, of R$ 523.4 million, on December 31, 2005 (loss of R$  602.6
      in 2004 and a gain of R$  202.2 in 2003), as follows:




**Financial
                liabilities**
            
            
            **Book value**
            
            
            **Market value**
            
            
            **Difference**“Bonds”
                - AmBev 11 and AmBev 13
            
            
            2,381.9
            
            
            2,867.9
            
            
            (486.0
            )Series
                A Notes (i)
            
            
            379.1
            
            
            392.9
            
            
            (13.8
            )Series
                B Notes (ii)
            
            
            100.6
            
            
            104.7
            
            
            (4.1
            )Senior
                Notes - BRI (iii)
            
            
            178.6
            
            
            202.8
            
            
            (24.2
            )Other
                currency international financing (iv)
            
            
            2,827.5
            
            
            2,827.5
            
            
            —Financing
                in R$ (iv)
            
            
            328.3
            
            
            328.3
            
            
            —BNDES/FINEP/EGF
                (iv)
            
            
            466.4
            
            
            466.4
            
            
            —Res.
                63/ Compror 63
            
            
            541.1
            
            
            536.4
            
            
            4.77,203.5
            
            
            7,726.9
            
            
            (523.4
            )




43




***Acquisition
      of Labatt***




We
      accounted for our transaction with Labatt as an acquisition of Labatt by AmBev
      for both Brazilian GAAP and U.S. GAAP reporting. Although InBev is the
      controlling shareholder of AmBev under EITF 96-16, the U.S. GAAP reporting
      was
      based on the analysis of paragraph 17 of SFAS 141, Business Combinations, which
      points to AmBev as the accounting acquirer of Labatt. See note 23.a) (v) to
      our
      consolidated financial statements included herewith.




***Accounting
      for less than majority owned subsidiaries***




Under
      Brazilian GAAP, we record joint-ventures, including investees in which we share
      control through our participation in a stockholders’ agreement under the
      proportional consolidation method. As of December 31, 2005, our most significant
      investment accounted for under the proportional consolidation method is our
      investment in Quinsa.




For
      purposes of U.S. GAAP, the subsidiaries that are accounted for under Brazilian
      GAAP on a proportional consolidation basis are recorded as equity in affiliates
      under the equity method of accounting as we do not hold a financial controlling
      interest of  their operations.




We
      believe our accounting for our investment in Quinsa to be consistent with SFAS
      No. 94 “Consolidation of All Majority-Owned Enterprises” and APB Opinion No. 18,
“The Equity Method of Accounting for Investments in Common Stock” and,
      therefore, no alternative accounting method to be available to us.




We
      do not have any variable interest entities at December 31, 2005 or 2004 which
      would be required to be consolidated under the provisions of FASB’s Financial
      Interpretation Fin 46-R “Consolidation of Variable Interest Entities (revised
      December 2003)”.




**Effect
      of Direct Distribution on Results of Operations**




Historically,
      both Brahma and Antarctica distributed their products through exclusive
      third-party distribution networks. In the second half of 1997, Brahma began
      to
      implement the direct distribution of its products.




As
      the proportion of our net sales made through direct distribution rises, our
      results of operations are affected as follows:




·
            Net
                sales increases. Net sales made through direct distribution are greater
                than net sales made through third parties. Under direct distribution,
                we
                receive a higher price for our products since we are selling directly
                to
                retail stores, capturing the gross margin previously retained by
                distributors.·
            We
                incur transportation costs. When we sell our products directly, we
                incur
                freight costs in transporting our products between our plant and
                the point
                of sale, which are included in our cost of sales under U.S. GAAP
                and in
                our direct distribution expenses under Brazilian GAAP.·
            Our
                sales, general and administrative expenses increase. Under the third-party
                distribution system, the salesperson is an employee of the distributor,
                while under direct distribution, the salesperson is our employee.
                As
                direct distribution grows, we incur additional direct distribution
                expenses from the hiring of additional employees which are offset
                by the
                increase in net sales.




**Foreign
      Currency Effects**




We
      have significant amounts of U.S. dollar-denominated assets and liabilities
      and
      operating expenses denominated in or linked to U.S. dollars. However, a
      substantial majority of our revenues are generated in currencies which exchange
      rate to the U.S. dollar may present significant volatility.




Fluctuations
      in the exchange rate to the U.S. dollar of currencies in which our revenues
      are
      generated may cause the following impact on our results of
      operations:




·
            Increases
                in our cost of sales and operating expenses, negatively impacting
                our
                profit margins. Historically, we have been able to raise prices to
                partially offset cost and expenses increases. However, during periods
                of
                rapid devaluation or when the rate of devaluation significantly exceeds
                that of inflation, we may not be able to raise prices at a rate sufficient
                to offset our cost and expenses increases, or to recover such cost
                and
                expenses increases in future periods. For risk management purposes,
                we may
                decide to hedge the whole or part of our cost and expenses exposure
                in
                U.S. dollars in order to avoid short-term volatility in our
                results.




44




·
            Volatility
                in our financial results, for the effects of fluctuations in exchange
                rates on our U.S. dollar transactions (i.e., cash, cash equivalents,
                short-term investments, investments abroad, loans and the unrealized
                gains
                and losses from foreign currency and interest rate swap contracts,
                among
                others) are recorded as financial income, financial expense and operating
                income (expense), net in our statements of
                operations.




We
      have
      policies designed to manage commodity and currency risks to protect our U.S.
      dollar-denominated transactions and net assets from the significant devaluations
      of the currencies in which we operate. We may enter into commodity and
      cross-currency interest rate swap contracts to offset gains or losses generated
      by our U.S. dollar denominated transactions and loans. According to Brazilian
      accounting principles, liabilities must be recorded on an accrual basis rather
      than at market value, while assets must be recorded at the lower of their market
      value or accrual value.




**Commodities
      Price Effects**




AmBev
      has a significant exposure to fluctuations in the price of aluminum, which
      increased by approximately 16.3% during 2005, increasing our cost of sales.
      For
      risk management purposes, we entered into hedging agreements during 2005, which
      had a positive impact on our results in 2005. Another significant exposure
      relates to fluctuations in the price of sugar, which increased approximately
      62.4% during 2005, increasing our cost.




**Taxes**




**** ***Taxes
      on income***




**** Income
      taxes in Brazil are comprised of Federal income tax and social contribution
      (which is an additional Federal income tax). The composite statutory rate
      applicable for the year ended on Decemeber 31, 2005, 2004 and 2003 was 34%.
      For
      the years of 2005, 2004 and 2003, our Brazilian GAAP effective tax rate was
      a
      charge of 35.6% in 2005, a charge of 30.5% in 2004 and a charge of 23.2% in
      2003.




**** The
      major reasons for the differences between the effective tax rates and the
      Brazilian composite statutory rates have been: (i) benefits arising from
      tax-deductible payments of interest on shareholder's equity without an interest
      charge in pre-tax income; (ii) certain non-deductible expenses; (iii) earnings
      from offshore companies not subject to different foreign tax rates; (iv)
      valuation allowances against net operating losses and reversals; (v) non-taxable
      benefits arising from state value-added incentive programs; (vi) amoritization
      of goodwill according to Brazilian tax legislation; (vii) tax losses
      carryforwards; and (viii) re-filings of tax returns following changes in
      interpretation of certain deductions; (ix) currency fluctuations.




**** Under
      U.S. GAAP, we recorded a benefit of R$ 148.0 million in 2002 corresponding
      to
      80% of the current value of tax loss carryforwards acquired at the time of
      the
      Pepsi transaction in 1997 which had been subject to certain restrictions through
      October 2002. Under Brazilian GAAP, which uses a different measurement
      criterion, this Pepsi tax asset was recorded as a credit to results in
      2003.




**** ***Tax
      losses available for offset***




**** We
      had
      recorded tax loss carryforward assets available for offset of R$ 896.9 millions
      as of December 31, 2005. Income tax losses available for offset in Brazil do
      not
      expire; however , the annual offset is limited to 30% of pretax
      income.




**Year
      ended December 31, 2005 Compared with Year ended December 31,
      2004**




AmBev’s
      consolidated results are the sum of the three following business
      units:




·
            **Brazil**,
                  consisting of:·
            Beer
                Brazil;·
            CSD
                & NANC Brazil - carbonated soft drinks and non-alcoholic,
                non-carbonated segments; and·
            Other
                products.·
            **Hispanic
                Latin America - HILA**, consisting of:·
            Quinsa
                - represents AmBev’s stake in Quinsa (59.2% as of December 31, 2005),
                which operates in Argentina, Bolivia, Chile, Paraguay and Uruguay;
                and·
            HILA-ex
                - represents AmBev’s other operations in Latin America, where we
                distribute beer (Peru, Ecuador, Guatemala, El Salvador, Nicaragua
                and
                Venezuela), soft drinks (Dominican Republic and Peru).·
            **North
                America**,
                consisting of Labatt’s operations, including domestic sales in Canada and
                exports to the USA.




As
      we had
      no sales outside of our Brazilian Operations and our former International
      Operations, now HILA Operations, until 2004, application of our new reporting
      methodology to prior periods does not result in any material changes to the
      reports previously made available for those periods.




45




The
      following table sets forth the consolidated financial highlights of AmBev for
      the years ended December 31, 2005 and 2004:




**Consolidated
                Financial Highlights****2005**
            
            **2004**
            
            **%
                Change*****(R$
                in millions, except volume amounts,***
              ***percentages
                and per share amounts)***Brazilian
                GAAPSales
                volume—000 hectoliters(1)
            
            
            125,313
            
            
            108,841
            
            
            15.1Net
                sales
            
            
            15,958.6
            
            
            12,006.8
            
            
            32.9Net
                revenue per hectoliter—R$ /hl
            
            
            139.4
            
            
            122.2
            
            
            14.1Cost
                of sales
            
            
            (5,742.3
            )
            
            (4,780.5
            )
            
            20.1Gross
                profit
            
            
            10,216.2
            
            
            7,226.3
            
            
            41.4***Gross
                margin (%)***
            
            
            64.0
            %
            
            60.2
            %Selling,
                general and administrative expenses
            
            
            (5,173.7
            )
            
            (3,611.1
            )
            
            43.3Provisions
                for contingencies
            
            
            (71.5
            )
            
            (260.2
            )
            
            -72.5Other
                operating income (expenses), net
            
            
            (1,075.3
            )
            
            (420.9
            )
            
            155.5Equity
                in results of subsidiaries
            
            
            2.0
            
            
            5.6
            
            
            -64.3Net
                financial income (expenses)
            
            
            (1,086.7
            )
            
            (776.4
            )
            
            40.0Operating
                income(2)
            
            
            2,811.0
            
            
            2,163.4
            
            
            29.9***Operating
                margin (%)***
            
            
            17.6
            %
            
            18.0
            %Net
                income
            
            
            1,545.7
            
            
            1,161.5
            
            
            33.1***Net
                margin***
            
            
            9.7
            %
            
            9.7
            %***Earnings
                per share - R$ /000 shares******(3)***
            
            
            *23.65*
            
            
            *21.26*
            
            
            *11.2*





*Amounts
                may not add due to rounding.*(1)
            Total
                beverage sales volume combines AmBev’s own beverage volume with total
                volume in Quinsa.(2)
            Under
                Brazilian GAAP, operating income includes net financial
                expense.(3)
            Calculated
                based on year-end number of shares, excluding treasury shares.




**Margin
      Analysis**




The
      following table sets forth certain items in our statement of operations
      expressed as percentages of net sales for the years ended December 31, 2005
      and
      2004:




**Year
                ended December 31,****2005**
            
            **2004*****(%)***
            
            ***(%)***Net
                sales
            
            
            100.0
            
            
            100.0Cost
                of sales
            
            
            (36.0
            )
            
            (39.8
            )Gross
                profit
            
            
            64.0
            
            
            60.2SG&A
            
            
            (32.4
            )
            
            (30.1
            )Provision
                for contingencies
            
            
            (0.4
            )
            
            (2.2
            )Other
                operating income (expenses), net
            
            
            (6.7
            )
            
            (3.5
            )Net
                financial income (expenses)
            
            
            (6.8
            )
            
            (6.5
            )Operating
                income (expenses)(1)
            
            
            17.6
            
            
            18.0





(1)
            Under
                Brazilian GAAP, operating income includes net financial expense.




46




**Financial
      Highlights by Business Segment**




The
      following table sets forth certain financial highlights by business segment
      for
      the years ended December 31, 2005 and 2004:




**Year
                ended December 31,****2005**
            
            
            **2004*****(R$
                in millions)*****Brazil**
            
            
            **HILA**
            
            
            **North**
              **America**
            
            
            **Brazil**
            
            
            **HILA**
            
            
            **North**
              **America****(1)**Net
                sales
            
            
            9,902.8
            
            
            2,080.3
            
            
            3,975.5
            
            
            8,525.9
            
            
            1,922.1
            
            
            1,558.8Cost
                of sales
            
            
            (3,488.9
            )
            
            (953.1
            )
            
            (1,300.3
            )
            
            (3,368.6
            )
            
            (909.5
            )
            
            (502.4
            )Gross
                profit
            
            
            6,413.9
            
            
            1,127.1
            
            
            2,675.2
            
            
            5,157.3
            
            
            1,012.5
            
            
            1,056.4Selling,
                general and administrative expenses
            
            
            (2,942.2
            )
            
            (764.7
            )
            
            (1,466.7
            )
            
            (2,416.8
            )
            
            (638.4
            )
            
            (556.1
            )





(1)
            North
                America’s results reflect the consolidation of Labatt’s operating results
                since August 27, 2004.




***Net
      Sales***




Net
      sales increased by 32.9% for the year ended December 31, 2005 to R$ 15,958.6
      million from R$ 12,006.8 million in the same period in
      2004.




**Sales
                Volumes****Year
                ended December 31,****2005**
            
            
            **2004**
            
            
            **2003*****(Thousands
                of hectoliters, except percentages)*****Brazil**
            
            
            **82,743.1**
            
            
            66.0
            %
            
            **76,884.9**
            
            
            70.7
            %
            
            **74,058.4**
            
            
            78.5
            %Beer
                Brazil
            
            
            62,486.4
            
            
            49.9
            %
            
            57,776.8
            
            
            53.1
            %
            
            55,260.2
            
            
            58.6
            %CSD
                & NANC
            
            
            20,256.7
            
            
            16.1
            %
            
            19,108.2
            
            
            17.6
            %
            
            18,798.3
            
            
            19.9
            %Other
                Products
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —**HILA**
            
            
            **31,678.6**
            
            
            25.3
            %
            
            **28,333.2**
            
            
            26.0
            %
            
            **20,301.3**
            
            
            21.5
            %Quinsa(1)
            
            
            24,997.5
            
            
            19.9
            %
            
            22,145.9
            
            
            20.3
            %
            
            18,514.6
            
            
            19.6
            %HILA-ex
            
            
            6,681.1
            
            
            5.4
            %
            
            6,187.2
            
            
            5.7
            %
            
            1,786.7
            
            
            1.9
            %**North
                America**(2)
            
            
            **10,891.6**
            
            
            8.7
            %
            
            **3,621.3**
            
            
            3.3
            %
            
            **—**
            
            
            **—****AmBev
                Consolidated**
            
            
            **125,313.3**
            
            
            
            
            
            **108,839.4**
            
            
            100.0
            %
            
            **94,359.7**
            
            
            100.0
            %





(1)
            Represents
                total Quinsa’s sale volumes.(2)
            Consists
                of the results of Labatt’s operations since August 27,
                2004.*Source*:
                AmBev




*Brazilian
      Operations*




Net
      sales from our Brazilian Operations increased by 16.1% for the year ended
      December 31, 2005 to R$ 9,902.8 million from R$ 8,525.9 million in the same
      period in 2004, primarily as a result of growth in beer and CSD & NANC
      sales.




Beer
      Brazil .
      Net
      sales of beer in Brazil increased by 17.5% for the year ended December 31,
      2005
      to R$ 8,119.1 million from R$ 6,907.4 million in the same period in 2004. This
      was due to an 8.2% increase in volumes sold as a result of an increase in the
      Brazilian beer market, and a higher market share in the period (68.3% in the
      year ended December 31, 2005 compared to 66.2% in the same period in 2004).
      Net
      sales per hectoliter increased by 8.7% to R$ 129.9/hl in 2005 from R$ 119.6/hl
      in 2004, mainly as a result of punctual price adjustments implemented during
      2005, greater contribution in the sales mix from our direct sale operation
      and
      increase in the premium segment.




47




CSD
      & NANC .
      Net
      sales increased by 12.7% for the year ended December 31, 2005 to R$ 1,648.7
      million from R$ 1,462.8 million in the same period in 2004 mainly as a result
      of
      a 6.0% increase in CSD & NANC volume for the year ended December 31, 2005
      and a 6.3% increase in net sales per hectoliter for soft drinks for the year
      ended December 31, 2005 compared with the same period in 2004, mainly as a
      result of price repositioning implemented during 2005 and greater contribution
      in the sales mix from our direct sale operation.




Other
      Products .
      Net
      sales decreased by 13.3% for the year ended December 31, 2005 to R$ 135.0
      million from R$ 155.8 million in the same period in 2004.




*HILA
      Operations*




Net
      sales increased by 8.2% for the year ended December 31, 2005 to R$ 2,080.3
      million from R$ 1,922.1 million in the same period in 2004. Both Quinsa’s
      performance and our HILA-ex operations contributed to this result.




AmBev’s
      stake in Quinsa contributed R$ 1,299.9 million to the Company’s consolidated
      revenues, yielding a growth of 12.7%. The main reasons for the increased
      revenues were beer and soft drinks volume growth of 7.1% and 26.0%,
      respectively; consolidated volume growth of 12.9%; growth of 10.4% in revenues
      per hectoliter, reaching US$38.2; and a higher AmBev stake in Quinsa’s capital
      (Dec/05: 59.2%; Dec/04: 54.8%).




AmBev’s
      operations in northern Latin America presented a revenue increase of 1.5% in
      2005, accumulating R$ 780.4 million. The main reasons for the increased revenue
      were consistent growth of AmBev’s operations in Venezuela; the Brahma launch in
      Peru and the Dominican Republic; and the first full year of Brahma sales in
      Ecuador. HILA-ex revenues were affected negatively by a tough competitive
      scenario for beer in Central America and for soft drinks in both Peru and
      Dominican Republic.




*North
      America*




Labatt’s
      operations in North America contributed R$ 3,975.5 million to AmBev’s
      consolidated revenues. The pro forma comparison with Labatt’s full year of 2004,
      in local currency (Canadian dollars), yielded a decrease in revenues of 1.2%.
      This result is mainly explained by Labatt’s sales volume decrease in the
      Canadian market due to higher competition from the low price segment; exports
      of
      Labatt Blue to the USA dropped, caused by intense competition from the US wine
      and liquor market, as well as imports of Mexican, European and Asian beer
      brands; and a substantial reduction in volumes of custom-made production
      contracted by Diageo USA (Guinness production in glass bottles for sale in
      the
      USA); this measure was taken by Labatt as part of its streamlining of its
      production structure, which included the shutting down of two plants in Canada
      (New Westminster and Toronto).




***Cost
      of Sales***




Total
      cost of sales increased by 20.1% for the year ended December 31, 2005 to R$
      5,742.3 million from R$ 4,780.5 million in the same period in 2004. During
      most
      of 2005 and 2004, we had currency hedge agreements in place to manage our
      exposure to variable U.S. dollar-linked costs, such as costs associated with
      aluminum cans, malt, hops, sugar and PET resin.




As
      a percentage of our net sales, total cost of sales decreased to 36.0% in 2005
      from 39.8% in 2004.




*Brazilian
      Operations*




Total
      cost of sales for our Brazilian operations increased by 3.6% for the year ended
      December 31, 2005 to R$ 3,488.9 million from R$ 3,368.6 million in the same
      period in 2004.




On
      a per hectoliter basis, our Brazilian operations’ cost of sales decreased by
      3.6% for the year ended December 31, 2005 to R$ 42.2/hl from R$ 43.8/hl in
      the
      same period in 2004.




48




Beer
      Brazil .
      Cost of
      sales for our Brazilian Beer operations increased by 4.4% for the year ended
      December 31, 2005 to R$ 2,575.3 million from R$ 2,467.0 million in the same
      period in 2004. On a per hectoliter basis, cost of sales for our Brazilian
      Beer
      operations decreased by 3.5% for the year ended December 31, 2005, to R$ 41.2/hl
      from R$ 42.7/hl in the same period in 2004. This decrease was a result of 
(i) a higher dilution of the fixed costs, which was possible due to sales volume
      growth and (ii) the productivity gains and corresponding production cost
      decreases resulting from AmBev’s continuous program of manufacturing industry
      excellence which more than offset the 2.7% increase in the effective exchange
      rate used by AmBev in the purchase of inputs that are sensitive to U.S. dollar
      fluctuation (the average exchange rate in 2005 was R$ 3.02/U.S.$, compared
      to R$
      2.94/U.S.$ in 2004).




CSD
      & NANC .
      Cost of
      sales for our Brazilian CSD & NANC operations increased by 3.8% for the year
      ended December 31, 2005 to R$ 851.7 million from R$ 820.5 million in the same
      period in 2004. On a per hectoliter basis, cost of sales decreased 2.1% for
      the
      year ended December 31, 2005 to R$ 42.0/hl from R$ 42.9/hl in the same period
      in
      2004. Similar to the beer operations, factory efficiency gains, as well as
      a
      greater dilution of production fixed costs, more than offset the increase in
      exchange rate for the purchase of raw materials.




Other
      Operations .
      The
      cost of sale of byproducts in Brazil decreased 23.7% for the year ended December
      31, 2005 to R$ 61.9 million from R$ 81.1 million for the same period in
      2004.




*HILA
      Operations*




Cost
      of sales for our HILA operations increased 4.8% for the year ended December
      31,
      2005 to R$ 953.1 million from R$ 909.5 million in the same period in 2004.
      On a
      per hectoliter basis, cost of sales for our HILA operations decreased by 10.7%
      for the year ended December 31, 2005 to R$ 45.7/hl from R$ 51.2/hl in the same
      period in 2004.




The
      consolidation of Quinsa’s cost of sales into AmBev accumulated R$ 536.7 million
      in 2005, representing a 5.2% growth. The main factors explaining this increase
      are (i) a 12.9% increase in the volume sold, reaching 24,997 million hectoliters
      and (ii) AmBev’s increased stake in Quinsa’s capital (December 2005: 59.2%;
      December 2004: 54.8%).




The
      cost of sales in AmBev’s HILA-ex operations rose 4.3%, reaching R$ 416.4
      million. The main factor leading to this increase is an 8.0% growth in the
      volume sold, reaching 6,681 million hectoliters.




*North
      America*




Labatt’s
      cost of goods sold recorded R$ 1,300.3 million for the year ended December
      31,
      2005. The pro forma comparison, in local currency, with Labatt’s results for the
      year ended December 31, 2004 shows a decrease in the cost of goods sold of
      6.5%.
      The main factor contributing to such reduction was a 2.9% decrease in production
      costs per unit.




***Gross
      Profit***




Gross
      profit increased by 41.4% for the year ended December 31, 2005 to R$ 10,216.2
      million from R$ 7,226.3 million in the same period in 2004. Gross margin as
      a
      percentage of sales increased to 64.0% in 2005 from 60.2% in 2004. The table
      below sets forth the contribution of each business unit to AmBev’s consolidated
      gross profit.




49




**Gross
                Profit****2005**
            
            **2004***(R$
                in millions, except percentages)***Amount**
            
            **%**
            
            **Margin**
            
            **Amount**
            
            **%**
            
            **Margin****Brazilian
                Operations**
            
            
            **6,413.9**
            
            
            **62.8**
            **%**
            
            **64.8**
            **%**
            
            **5,157.3**
            
            
            **71.4**
            **%**
            
            **60.5**
            **%**Beer
                Brazil
            
            
            5,543.8
            
            
            54.3
            %
            
            68.3
            %
            
            4,440.3
            
            
            61.5
            %
            
            64.3
            %CSD
                & NANC Brazil
            
            
            797.0
            
            
            7.8
            %
            
            48.3
            %
            
            642.2
            
            
            8.9
            %
            
            43.9
            %Other
                Products
            
            
            73.1
            
            
            0.7
            %
            
            54.2
            %
            
            74.7
            
            
            1.0
            %
            
            48.0
            %**HILA
                Operations**
            
            
            **1,127.1**
            
            
            **11.0**
            **%**
            
            **54.2**
            **%**
            
            **1,012.5**
            
            
            **14.0**
            **%**
            
            **52.7**
            **%**Quinsa(1)
            
            
            763.2
            
            
            7.5
            %
            
            58.7
            %
            
            642.7
            
            
            8.9
            %
            
            55.7
            %Hila-ex
            
            
            364.0
            
            
            3.5
            %
            
            46.6
            %
            
            369.9
            
            
            5.1
            %
            
            48.1
            %**North
                America****(2)**
            
            
            **2,675.2**
            
            
            **26.2**
            **%**
            
            **67.3**
            **%**
            
            **1,056.4**
            
            
            **14.6**
            **%**
            
            **67.8**
            **%****Total**
            
            
            **10,216.2**
            
            
            **100.0**
            **%**
            
            **64.0**
            **%**
            
            7,226.3
            
            
            100.0
            %
            
            60.2
            %





(1)
            Calculated
                based on our proportional share of the results of operations of Quinsa.




(2)
            North
                America’s results reflect the consolidation of Labatt’s operating results
                since August 27, 2004.




***Selling,
      General  and Administrative Expenses***




In
      2005, AmBev revised how it reports its selling, general and administrative
      expenses. AmBev will no longer provide the breakdown of: (i) selling and
      marketing; (ii) direct distribution; and (iii) General and Administrative
      expenses.




AmBev’s
      sales, general and administrative expenses amounted to R$ 5,173.7 million for
      the year ended December 31, 2005, a 43.3% increase over the same period in
      2004.
      The analysis of such expenses at each business unit is shown below.




*Brazil*




Sales,
      general and administrative expenses in Brazil amounted to R$ 2,942.2 million
      for
      the year ended December 31, 2005, an increase of 21.7% over the same period
      in
      2004.




Beer
      Brazil .
      Sales,
      general and administrative expenses reached R$ 2,469.0 million for the year
      ended December 31, 2005, climbing 20.0% over the same period in 2004. The main
      elements that resulted in the increase in such operating expenses were: (i)
      the
      higher sales volume of AmBev’s direct distribution structure; (ii) an increase
      in AmBev’s billing to some clients, which the Company maintains agreements with,
      referring to a proportional contribution of funds in trading activities; and
      (iii) higher deferred asset amortization expenses, mainly due to the
      incorporation of InBev Brazil on July 28, 2005. The operating expenses related
      to depreciation and amortization reached R$ 507.7 for the year ended December
      31, 2005, an increase of 53.5% over the same period in 2004.




CSD
      & Nanc .
      Sales,
      general and administrative expenses for the CSD & Nanc segment accumulated
      R$ 470.1 million for the year ended December 31, 2005, an increase of 32.1%
      over
      the same period in 2004. The main elements that generated the increase of such
      operating expenses were: (i) higher sales volume through AmBev’s direct
      distribution structure; (ii) planned and significant increase in sales and
      marketing budget for CSD & Nanc in 2005, offsetting 2004 budgetary
      restrictions, a year in which the absolute priority for AmBev’s Brazilian
      operations was to recover its beer market share; and (iii) higher deferred
      asset
      amortization expenses, mainly due to the incorporation of InBev Brasil on July
      28, 2005. The operating expenses related to depreciation and amortization
      recorded R$ 163.8 million for the year ended December 31, 2005, an increase
      of
      49.6% over the same period in 2004.




Malt
      and By-products .
      Malt
      and by-products sales generated sales, general and administrative expenses
      of R$
      3.1 million for the year ended December 31, 2005, increasing 7.5% over the
      same
      period in 2004.




*HILA*




Sales,
      general and administrative expenses for the HILA business unit amounted to
      R$
      764.7 million for the year ended December 31, 2005, increasing 19.8% over the
      same period in 2004. A more detailed analysis of the development of these
      expenses is shown below.




Quinsa .
      Sales,
      general and administrative expenses consolidated into AmBev, through its stake
      in Quinsa, accumulated R$ 324.4 million for the year ended December 31, 2005,
      increasing 6.9% over the same period in 2004. This increase is mostly explained
      by AmBev’s higher stake in Quinsa’s capital (December 2005: 59.2%; December
      2004: 54.8%).




50




HILA-ex .
      Sales,
      general and administrative expenses for AmBev’s operations in northern Latin
      America amounted to R$ 440.4 million for the year ended December 31, 2005,
      increasing 31.5% over the same period in 2004. The main reason for higher
      expenses was expenditures related to Brahma’s launch in Peru and the Dominican
      Republic, both in promotion and distribution.




*North
      America*




Labatt’s
      sales, general and administrative expenses amounted to R$ 1,466.7 million for
      the year ended December 31, 2005. The pro forma comparison in local currency
      with Labatt results in 2004 presented a decrease of 6.3% for such expenses,
      driven primarily by successful initiatives to reduce expenditures implemented
      by
      AmBev throughout the year.




***Provisions
      for contingencies***




Net
      expenses with provisions for contingencies and others recorded R$ 71.5 million
      for the year ended December 31, 2005. The main entries that comprise this total
      are (i) a provision of R$ 113.3 million related to labor claims and (ii) a
      reversal of R$ 56.3 million related to ICMS and IPI tax claims.




***Other
      operating income (expense), net***




The
      net balance of other operating income and expenses for the year ended December
      31, 2005 represented a loss of R$ 1,075.3 million, 155.5% higher in relation
      to
      the loss recorded in 2004. The breakdown of the main entries is shown as
      follows: (i) a gain of R$ 151.8 million referring to assets increase resulting
      from fiscal incentives granted to AmBev’s subsidiaries in Brazil; (ii) a gain of
      R$ 52.2 million referring to the recovery in Brazil of PIS and COFINS tax
      credits; (iii) an expense of R$ 923.5 million resulting from the goodwill
      amortization related to AmBev’s investment in Labatt; (iv) an expense of R$
      184.3 million derived from the goodwill amortization related to Labatt’s
      investments in North America; (v) an expense of R$ 164.6 million resulting
      from
      the goodwill amortization related to AmBev’s investments in Latin America; and
      (vi) an expense of R$ 74.1 million derived from exchange rate variation on
      the
      Company’s investments abroad.




***Net
      Financial Income (Expenses)***




Our
      financial income consists of realized and unrealized gains from financial
      instruments, foreign exchange gains (losses) on investments, financial income
      on
      cash equivalents and others. Our financial expenses consist of foreign exchange
      gains (losses) on loans, realized and unrealized losses from financial
      instruments, interests and charges on loans, taxes on financial transactions,
      interest on contingencies and others.




We
      enter into hedging transactions to address AmBev’s Brazilian foreign currency
      debt exposure, which involve cash investments in U.S. dollar-linked assets,
      as
      well as the use of swaps and derivatives. As a result of Brazilian accounting
      requirements, volatility in the *real* /U.S.
      dollar exchange rate and interest rates can cause significant variations in
      financial income and expenses.




In
      2005, AmBev revised how it reports its financial income and financial losses
      to
      better reflect the actual effect of each financial instrument. The new reports
      create no changes on Net Financial Results.




Financial
      income for the year ended December 31, 2005 was R$ 521.2 compared to financial
      income of R$ 468.5 million in the same period in 2004.




Financial
      expenses for the year ended December 31, 2005 were R$ 1,607.9 million compared
      to R$ 1,244.9 million in the same period in 2004. This difference can be
      explained by a higher debt balance.




Net
      Financial Results for the year ended December 31, 2005 were a loss of R$ 1,086.7
      million, compared to a loss of R$ 776.3 million in the same period of
      2004.




51




***Operating
      income***




Operating
      income increased by 29.9% for the year ended December 31, 2005 to R$ 2,811.0
      million from R$ 2,163.3 million in the same period in 2004.




***Non-Operating
      income (expense), net***




The
      net balance of other non-operating income and expenses resulted in a loss of
      R$
      234.3 million for the year ended December 31, 2005, compared to a loss of R$
      333.8 million in the same period in 2004. The breakdown of the main entries
      is
      the following:




(i)
            a
                loss of R$ 158.2 million related to the provision recorded for Labatt’s
                brewery shutting down in Toronto. The accrued items are the following:
                (a)
                loss of property, plant and equipment (R$ 46.7 million); (b) supplement
                for the provision of employees benefits (R$ 69.9 million); and (c)
                employee dismissal costs (R$ 41.6 million).(ii)
            a
                loss of R$ 65.6 million related to AmBev’s investment in Quinsa, as a
                result of the buy-back of its own shares in the market carried out
                by
                Quinsa during 2005.




***Income
      tax benefit (expense)***




Our
      consolidated income tax and social contribution for the year ended December
      31,
      2005 was a charge of R$ 845.1 million, up 65.1% from R$ 511.7 million in 2004.
      At the nominal tax rate of 34%, income tax for the year ended December 31,
      2005
      would have amounted to R$ 807.2 million. Our effective income tax rate in the
      year ended December 31, 2005 was positively affected by the benefit from tax
      deductible distribution of interest attributed to shareholder’s equity (R$ 253.0
      million) and negatively affected by (i) non-taxable equity gains attributable
      to
      subsidiaries (R$ 174.1 million) and (ii) non tax-deductible goodwill
      amortization (R$ 211.4 million).




***Profit
      sharing and contributions***




Provisions
      for employee and management profit sharing increased to R$ 202.8 million for
      the
      year ended December 31, 2005 from R$ 152.4 million in the same period in 2004.
      Both in 2005 and 2004, as AmBev’s corporate goals were met, our administrative
      employees were entitled to bonuses under our profit sharing plan. See
“Directors, Senior Management and Employees—Compensation—Profit Sharing
      Plan”.




***Minority
      interest***




Minority
      shareholders in our subsidiaries shared a loss of R$ 16.8 million for the year
      ended December 31, 2005 compared to gains of R$ 3.8 million in
      2004.




***Net
      Income***




Net
      income increased by 33.1% for the year ended December 31, 2005 to R$ 1,545.7
      million from R$ 1,161.5 million in the same period in 2004.




**Year
      ended December 31, 2004 Compared with Year ended December 31,
      2003**




In
      2004, AmBev revised how it reports its operating results to better reflect
      the
      expanding geographical scope of its business. Previously, our operating results
      were categorized into four primary business segments: Beer Brazil, CSD and
      NANC,
      Other Products and International Operations. In order to provide a more
      meaningful presentation of AmBev’s operations outside Brazil as that became a
      more significant portion of AmBev’s operations, our reports now reflect the
      following three business segments:




·
            **Brazil**,
                consisting of:·
            Beer
                Brazil;·
            CSD
                & NANC Brazil - carbonated soft drinks and non-alcoholic,
                non-carbonated segments; and·
            Other
                products.




52




·
            **Hispanic
                Latin America - HILA**,
                consisting of:·
            Quinsa
                - represents AmBev’s stake in Quinsa (54.8% as of December 31, 2004),
                which operates in Argentina, Bolivia, Chile, Paraguay and Uruguay;
                and·
            HILA-ex
                - represents AmBev’s other operations in Latin America, where we
                distribute beer (Peru, Ecuador, Guatemala, El Salvador, Nicaragua
                and
                Venezuela) and soft drinks (Dominican Republic and Peru).·
            **North
                America**,
                consisting of Labatt’s operations, including domestic sales in Canada and
                exports to the USA.




As
      we had
      no sales outside of our Brazilian Operations and our former International
      Operations, now HILA Operations, until 2004, application of our new reporting
      methodology to prior periods does not result in any material changes to the
      reports previously made available for those periods.




The
      following table sets forth the consolidated financial highlights of AmBev for
      the years ended December 31, 2004 and 2003:


**Consolidated
                  Financial Highlights****2004**
              
              **2003**
              
              **%Change*****(R$
                  in millions, except volume amounts,******percentages
                  and per share amounts)***Brazilian
                  GAAPSales
                  volume—000 hectoliters(1)
              
              
              108,840.5
              
              
              94,359.7
              
              
              29.1Net
                  sales
              
              
              12,006.8
              
              
              8,683.8
              
              
              38.3Net
                  revenue per hectoliter—R$ /hl
              
              
              122.2
              
              
              103.0
              
              
              18.6Cost
                  of sales
              
              
              (4,780.5
              )
              
              (4,044.2
              )
              
              18.2Gross
                  profit
              
              
              7,226.3
              
              
              4,639.6
              
              
              55.8***Gross
                  margin (%)***
              
              
              *60*
              *%*
              
              *53.4*
              %Selling,
                  general and administrative expensesSelling
                  and marketing expenses
              
              
              (1,582.8
              )
              
              (847.1
              )
              
              86.8Direct
                  distribution expenses
              
              
              (868.9
              )
              
              (648.6
              )
              
              34.0General
                  and administrative expenses, including directors’ fees
              
              
              (617.9
              )
              
              (417.9
              )
              
              47.9Depreciation
                  and amortization(2)
              
              
              (541.5
              )
              
              (420.0
              )
              
              28.9Total
                  selling, general and administrative expense
              
              
              (3,611.1
              )
              
              (2,333.5
              )
              
              54.8Provisions
                  for contingencies
              
              
              (260.2
              )
              
              (187.9
              )
              
              38.5Other
                  operating income (expenses), net
              
              
              (420.9
              )
              
              (240.1
              )
              
              75.3Equity
                  in results of subsidiaries
              
              
              5.6
              
              
              (6.2
              )
              
              (9.7
              )Net
                  financial income (expenses)
              
              
              (776.4
              )
              
              93.1
              
              
              —Operating
                  income(4)
              
              
              2,163.4
              
              
              1,964.9
              
              
              10.1***Operating
                  margin (%)***
              
              
              *18.0*
              *%*
              
              *22.6*
              *%*Net
                  income
              
              
              1,161.5
              
              
              1,411.6
              
              
              (17.7
              )***Net
                  margin***
              
              
              *9.7*
              *%*
              
              *16.3*
              *%****Earnings
                  per share - R$ /000 shares******(3)***
              
              
              *21.26*
              
              
              *37.23*
              
              
              *(42.9*
              *)*







*Amounts
                may not add due to rounding.*(1)
            Total
                beverage sales volume combines AmBev’s own beverage volume with Quinsa’s
                Total volume.(2)
            Does
                not include depreciation recorded on production assets which is recorded
                within “Cost of Sales”, nor amortization of goodwill which is within
                “Other operating income (expenses), net”.(3)
            Calculated
                based on year-end number of shares, excluding treasury shares.(4)
            Under
                Brazilian GAAP, operating income includes net financial
                expense.




53




**Margin
      Analysis**




The
      following table sets forth certain items in our statement of operations
      expressed as percentages of net sales for the years ended December 31, 2004
      and
      2003:




**Year
                ended December 31,****2004**
            
            **2003*****(%)***
            
            ***(%)***Net
                sales
            
            
            100.0
            
            
            100.0Cost
                of sales
            
            
            (39.8
            )
            
            (46.6
            )Gross
                profit
            
            
            60.2
            
            
            53.4Selling
                and marketing expenses
            
            
            (13.2
            )
            
            (9.8
            )Direct
                distribution expenses
            
            
            (7.2
            )
            
            (7.5
            )General
                and administrative expenses, including directors’ fees
            
            
            (5.1
            )
            
            (4.8
            )Depreciation
                and amortization
            
            
            (4.5
            )
            
            (4.8
            )Provision
                for contingencies
            
            
            (2.2
            )
            
            (2.2
            )Other
                operating income (expenses), net
            
            
            (3.5
            )
            
            (2.8
            )Net
                financial income (expenses)
            
            
            (6.5
            )
            
            1.1Operating
                income (expenses)(1)
            
            
            18.0
            
            
            22.6







(1)
            Under
                Brazilian GAAP, operating income includes net financial expense.




**Financial
      Highlights by Business Segment**




The
      following table sets forth certain financial highlights by business segment
      for
      the years ended December 31, 2004 and 2003:




**Year
                ended December 31,****2004**
            
            **2003***(R$
                in millions)***Brazil**
            
            **HILA**
            
            **North
                America****(1)**
            
            **Brazil**
            
            **HILA**
            
            **North
                America**Net
                sales
            
            
            8,525.9
            
            
            1,922.1
            
            
            1,558.8
            
            
            7,637.7
            
            
            1,046.1
            
            
            N/ACost
                of sales
            
            
            (3,368.6
            )
            
            (909.5
            )
            
            (502.4
            )
            
            (3,509.4
            )
            
            (534.7
            )
            
            N/AGross
                profit
            
            
            5,157.3
            
            
            1,012.5
            
            
            1,056.4
            
            
            4,128.3
            
            
            511.3
            
            
            N/ASelling,
                general and administrative Expenses
            
            
            (2,416.8
            )
            
            (638.4
            )
            
            (556.1
            )
            
            (1,957.5
            )
            
            (376.0
            )
            
            N/A







(1)
            North
                America’s results reflect the consolidation of Labatt’s operating results
                since August 27, 2004.




***Net
      Sales***




Net
      sales increased by 38.3% for the year ended December 31, 2004 to R$ 12,006.8
      million from R$ 8,683.8 million in the same period in 2003. This increase was
      a
      result of an organic growth of 12.0% and a contribution of R$ 2,278 million
      of
      new investments made during 2004.




54




**Sales
                Volumes**
              **Year
                ended December 31,****2004**
            
            **2003**
            
            **2002*****(Thousands
                of hectoliters, except percentages)*****Brazil**
            
            
            **76,884.9**
            
            
            **70.7**
            **%**
            
            **74,058.4**
            
            
            **78.5**
            **%**
            
            **77,650.4**
            
            
            **98.3**
            **%**Beer
                Brazil
            
            
            57,776.8
            
            
            53.1
            %
            
            55,260.2
            
            
            58.6
            %
            
            58,009.6
            
            
            73.5
            %CSD
                & NANC
            
            
            19,108.2
            
            
            17.6
            %
            
            18,798.3
            
            
            19.9
            %
            
            19,640.8
            
            
            24.9
            %Other
                Products
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —**HILA**
            
            
            **28,333.2**
            
            
            **26.0**
            **%**
            
            **20,301.3**
            
            
            **21.5**
            **%**
            
            **1,327.1**
            
            
            **1.7**
            **%**Quinsa(1)
            
            
            22,145.9
            
            
            20.3
            %
            
            18,514.6
            
            
            19.6
            %
            
            —
            
            
            —HILA-ex
            
            
            6,187.2
            
            
            5.7
            %
            
            2,056.6
            
            
            1.9
            %
            
            1,327.1
            
            
            1.7
            %**North
                America**(2)
            
            
            **3,621.3**
            
            
            **3.3**
            **%**
            
            **—**
            
            
            **—**
            
            
            **—**
            
            
            **—****AmBev
                Consolidated**
            
            
            **108,839.4**
            
            
            **100.0**
            **%**
            
            **94,359.7**
            
            
            **100.0**
            **%**
            
            **78,977.5**
            
            
            **100.0**
            **%**







(1)
            Represents
                Total Quinsa’s sale volumes.(2)
            Consists
                of the results of Labatt’s operations since August 27,
                2004.*Source*:
                AmBev




*Brazilian
      Operations*




Net
      sales from our Brazilian Operations increased by 11.6% for the year ended
      December 31, 2004 to R$ 8,525.9 million from R$ 7,637.7 million in the same
      period in 2003, primarily as a result of growth in beer and CSD & NANC
      sales.




Beer
      Brazil .
      Net
      sales of beer in Brazil increased by 13.0% for the year ended December 31,
      2004
      to R$ 6,907.4 million from R$ 6,114.6 million in the same period in 2003. This
      was due to a 4.6% increase in volumes sold as a result of a 1.8% increase in
      the
      Brazilian beer market, according to ACNielsen, and a higher market share in
      the
      period (66.2% in the year ended December 31, 2004 compared to 67.2% in the
      same
      period in 2003). Net sales per hectoliter increased by 8.0% to R$ 119.6/hl
      in
      2004 from R$ 110.7/hl in 2003, mainly as a result of punctual price adjustments
      implemented during 2004 and greater contribution in the sales mix from our
      direct sale operation (40.7% in 2004 compared with 32.4% in 2003).




CSD
      & NANC .
      Net
      sales increased by 9.8% for the year ended December 31, 2004 to R$ 1,462.8
      million from R$ 1,332.1 million in the same period in 2003 mainly as a result
      of
      a 4.4% increase in CSD, net sales for the year ended December 31, 2004 to R$
      1,356.2 million from R$ 1,205.1 million in the same period in 2003 and an 8%
      increase in net sales per hectoliter for soft drinks for the year ended December
      31, 2004 compared with the same period in 2003, mainly as a result of price
      repositioning implemented during 2004 and a focus on our greater profitability
      packages and brands.




Other
      Products .
      Net
      sales decreased by 18.4% for the year ended December 31, 2004 to R$ 155.8
      million from R$ 191.0 million in the same period in 2003.




*HILA
      Operations*




Net
      sales increased by 83.7% for the year ended December 31, 2004 to R$ 1,922.1
      million from R$ 1,046.1 million in the same period in 2003. Both Quinsa’s
      performance and our HILA-ex operations contributed to this result. The growth
      in
      beer and soft drinks sales volume, of 18.3% and 23.1%, respectively, also
      contributed to this increase. In addition, the 9.7% increase in revenues per
      hectoliter in dollar terms and the increase of AmBev’s stake in Quinsa’s
      capital, to 54.8% in the year ended December 31, 2004 from 49.7% for the same
      period in 2003, both contributed to this increase. Our stake in Quinsa
      contributed R$ 1,153.0 million, a 49.0% increase.




On
      a per hectoliter basis, cost of sales for our HILA Operations decreased by
      1.8%
      for the year ended December 31, 2004 to R$ 51.2/hl from R$ 52.2/hl in the same
      period in 2003.




Our
      operation in the Hila-ex region showed a 182.4% increase in revenues for the
      year ended December 31, 2004 when compared to the same period in 2003 to R$
      769.1 million. The main elements contributing to this increase were the
      following: (i) the 43.9% growth in Venezuela volumes; (ii) the first full year
      of operations in Ecuador, Guatemala and Peru; (iii) our entrance into the
      Nicaraguan market; (iv) the launching of *Brahma* in
      Ecuador, with a market share estimated at 17.9% in December 2004; and (v) our
      investment in Embodom in February 2004, the anchoring bottling company of *Pepsi
      Cola* in the
      Caribbean and the leading player in the Dominican Republic’s soft drinks market
      with a 59.7% market share.




55




*North
      America*




Net
      sales in North America for the year ended December 31, 2004 reflect four months
      of consolidated results of Labatt and totaled R$ 1,558.8 million. These sales
      were primarily a result of sales of 3.02 million hectoliters of beer in the
      Canadian market, with revenues per hectoliter of C$208.1/hl, and an increase
      in *Budweiser* market
      share, the top brand in Canada, to 12.3% in December 2004. Labatt also exported
      0.60 million hectoliters of beer to the United States over the four-month
      period, with revenues per hectoliter of C$61.7/hl.




***Cost
      of Sales***




Total
      cost of sales increased by 18.2% for the year ended December 31, 2004 to R$
      4,780.5 million from R$ 4,044.2 million in the same period in 2003. During
      most
      of 2004 and 2003, we had currency hedge agreements in place to manage our
      exposure to variable U.S. dollar-linked costs, such as costs associated with
      aluminum cans, malt, hops, sugar and PET resin.




As
      a percentage of our net sales, total cost of sales decreased to 39.8% in 2004
      from 46.6% in 2003.




*Brazilian
      Operations*




Total
      cost of sales for our Brazilian operations decreased by 4.0% for the year ended
      December 31, 2004 to R$ 3,368.6 million from R$ 3,509.4 million in the same
      period in 2003.




On
      a per hectoliter basis, our Brazilian operations’ cost of sales decreased by
      7.5% for the year ended December 31, 2004 to R$ 43.8/hl from R$ 47.4/hl in
      the
      same period in 2003.




Beer
      Brazil .
      Cost of
      sales for our Brazilian beer operations decreased by 1.5% for the year ended
      December 31, 2004 to R$ 2,467.0 million from R$ 2,503.6 million in the same
      period in 2003. On a per hectoliter basis, cost of sales for our Brazilian
      beer
      operations decreased by 5.8% for the year ended December 31, 2004 to R$ 42.7/hl
      from R$ 45.3/hl in the same period in 2003. This decrease was primarily a result
      of the following: (i) a 12.4% reduction in the effective exchange rate used
      by
      AmBev in the purchase of inputs that are sensitive to the U.S. dollar
      fluctuation (the average exchange rate in 2004 was R$ 2.94/U.S.$, compared
      to R$
      3.35/U.S.$ in 2003); (ii) a greater dilution of fixed costs based on the 4.6%
      increase in sales volume; and (iii) a reduction in the prices of raw materials
      for the preparation of beer. These factors offset the increase in packaging
      costs caused by high aluminum prices during 2004.




CSD
      & NANC .
      Cost of
      sales for our Brazilian CSD & NANC operations decreased by 7.5% for the year
      ended December 31, 2004 to R$ 820.5 million from R$ 887.3 million in the same
      period in 2003. On a per hectoliter basis, cost of sales decreased 9.0% for
      the
      year ended December 31, 2004 to R$ 42.9/hl from R$ 47.2/hl in the same period
      in
      2003. This decrease was primarily as a result of a significant reduction in
      the
      R$ /U.S.$ exchange rate, the lower cost of sugar during the first half of 2004
      and the timely hedging for our sugar exposure position in the second half of
      the
      year.




**Other
      Operations** .
      The
      cost of sale of byproducts in Brazil decreased by 31.6% for the year ended
      December 31, 2004 to R$ 81.1 million from R$ 118.6 million for the same period
      in 2003.




*HILA
      Operations*




Cost
      of sales for our HILA operations increased by 70.1% for the year ended December
      31, 2004 to R$ 909.5 million from R$ 534.7 million in the same period in 2003.
      On a per hectoliter basis, cost of sales for our HILA Operations decreased
      by
      1.8% for the year ended December 31, 2004 to R$ 51.2/hl from R$ 52.2/hl in
      the
      same period in 2003.




56




The
      consolidation of Quinsa’s cost of sales was R$ 510.3 million in the year ended
      December 31, 2004, representing an increase of 31.8% over the same period in
      2003, due to the 14% increase, in U.S. dollars terms, of Quinsa’s cost of sales
      which was partially offset by the cost of sales per hectoliter that dropped
      4.0%, reaching U.S.$15.3/hl. Cost of sales also increased due to the increase
      in
      our economic interest in Quinsa.




The
      cost of sales in our HILA-ex operations for the year ended December 31, 2004
      rose 170.7% to R$ 399.3 million due primarily to the increase in our investments
      and our expansion of our operations in the region. From September 2003 through
      December 2004, we started up operations in Ecuador, Guatemala, Nicaragua, Peru
      and the Dominican Republic and had a 43.9% volume increase in our operation
      in
      Venezuela.




*North
      America*




Our
      cost of sales in North America was R$ 502.4 million for the year ended December
      31, 2004.




***Gross
      Profit***




Gross
      profit increased by 55.8% for the year ended December 31, 2004 to R$ 7,226.3
      million from R$ 4,639.6 million in the same period in 2003. Gross margin as
      a
      percentage of sales increased to 60.2% in 2004 from 53.4% in 2003. This positive
      result was due to organic growth of 37.9% and a contribution of R$ 1,423.4
      million of new investments made during 2004. The table below sets forth the
      contribution of each business unit to AmBev’s consolidated gross profit.




**Gross
                Profit****2004**
            
            **2003***(R$
                in millions, except percentages)***Amount**
            
            **%**
            
            **Margin**
            
            **Amount**
            
            **%**
            
            **Margin****Brazilian
                Operations**
            
            
            **5,157.3**
            
            
            **71.4**
            **%**
            
            **60.5**
            **%**
            
            **4,128.3**
            
            
            **89.0**
            **%**
            
            **54.1**
            **%**Beer
                Brazil
            
            
            4,440.3
            
            
            61.5
            %
            
            64.3
            %
            
            3,611.0
            
            
            77.8
            %
            
            59.1
            %CSD
                & NANC Brazil
            
            
            642.2
            
            
            8.9
            %
            
            43.9
            %
            
            444.9
            
            
            9.6
            %
            
            33.4
            %Other
                Products
            
            
            74.7
            
            
            1.0
            %
            
            48.0
            %
            
            72.3
            
            
            1.6
            %
            
            37.9
            %HILA
                Operations
            
            
            1,012.5
            
            
            14.0
            %
            
            52.7
            %
            
            511.3
            
            
            11.0
            %
            
            48.9
            %Quinsa(1)
            
            
            642.7
            
            
            8.9
            %
            
            55.7
            %
            
            386.4
            
            
            8.3
            %
            
            49.9
            %Hila-ex
            
            
            369.9
            
            
            5.1
            %
            
            48.1
            %
            
            124.9
            
            
            2.7
            %
            
            45.9
            %**North
                America**(2)
            
            
            1,056.4
            
            
            14.6
            %
            
            67.8
            %
            
            -
            
            
            -
            
            
            -**Total**
            
            
            **7,226.3**
            
            
            **100.0**
            **%**
            
            **60.2**
            **%**
            
            **4,639.6**
            
            
            **100.0**
            **%**
            
            **53.4**
            **%**







(1)
            Calculated
                based on our proportional share of the results of operations of Quinsa.




(2)
            North
                America’s results reflect the consolidation of Labatt’s operating results
                from August 27, 2004 through December 31,
                2004.




***Selling
      and Marketing Expenses***




Selling
      and marketing expenses increased by 86.9% for the year ended December 31, 2004
      to R$ 1,582.8 from R$ 847.1 million for the same period in 2003.




*Brazilian
      Operations*




Selling
      and marketing expenses for our Brazilian operations increased 32.8% for the
      year
      ended December 31, 2004 to R$ 833.7 million from R$ 627.9 million in 2003.
      Selling and marketing expenses for the Brazilian beer operation reached R$
      736.5
      million for the year ended December 31, 2004, an increase of 37.9% from the
      same
      period in 2003. The increase in expenses was a result of (i) higher expenditures
      related to advertising and promotion and (ii) the enlargement of our trade
      marketing programs. Brazilian CSD & NANC selling and marketing expenses
      totaled R$ 97.2 million for the year ended December 31, 2004, an increase of
      3.4% when compared to the same period in 2003, mainly due to (i) the development
      of the *Guaraná
      Antarctica* brand,
      the flagship of our CSD & NANC portfolio, and (ii) the implementation of new
      trade marketing programs.




57




*HILA
      Operations*




Selling
      and marketing expenses for HILA Operations totaled R$ 337.9 million for the
      year
      ended December 31, 2004, increasing 54.2% when compared to the same period
      in
      2003. Our consolidated selling and marketing expenses in Quinsa totaled R$
      210.8
      million for the year ended December 31, 2004, increasing 31.9% when compared
      to
      the same period in 2003, due mainly to a 15.1% (in US dollar terms) increase
      in
      the sales and marketing expenses of Quinsa and the increase of our stake in
      Quinsa. Selling and marketing expenses for our HILA-ex operations amounted
      to R$
      127.2 million for the year ended December 31, 2004, increasing 114.5% when
      compared to the same period in 2003. The main causes of this increase were
      (i)
      the consolidation of new operations started by AmBev during its expansion
      process and (ii) investments made to promote the launching of *Brahma* in
      Ecuador.




*North
      America*




Selling
      and marketing expenses in North America for the year ended December 31, 2004
      totaled R$ 411.2 million.




***Direct
      Distribution Expenses***




Direct
      distribution expenses include sales personnel, product delivery charges and
      delivery personnel required to distribute our products. Direct distribution
      expenses increased by 34% for the year ended December 31, 2004 to R$ 869.0
      million from R$ 648.6 million in the same period in 2003.




*Brazilian
      Operations*




Direct
      distribution expenses in Brazilian operations totaled R$ 753.2 million for
      the
      year ended December 31, 2004, increasing 24.5% from R$ 605.2 million for the
      year ended December 31, 2003. This increase in expenses is explained primarily
      by an increase of 23.0% in the volume sold by direct distribution in our
      Brazilian operations, representing 43.7% of the total sales volume in 2004
      compared with 36.9% in 2003, reflecting our strategy to increase the percentage
      of volumes of our Brazilian operations sold through our direct distribution
      network. On a per hectoliter basis, our Brazilian operations’ direct
      distribution expenses increased 1.1% for the year ended December 31, 2004 to
      R$
      22.4/hl from R$ 22.2/hl for the same period in 2003.




*HILA
      Operations*




Direct
      distribution expenses in our HILA operations totaled R$ 88.3 million, increasing
      by 103.4%. These expenses refer solely to our HILA-ex operations as direct
      distribution expenses in Quinsa are recorded as sales and marketing expenses.
      This increase is a result of (i) an increase of 48.4% in direct distribution
      volumes in Venezuela and (ii) the implementation of direct distribution in
      Peru.




*North
      America*




Direct
      distribution expenses in North America totaled R$ 27.5 million.




***General
      and Administrative Expenses***




General
      and administrative expenses increased by 47.9% for the year ended December
      31,
      2004 to R$ 617.9 million from R$ 417.9 million in the same period in 2003,
      primarily as a result of higher fees paid to our executive officers as part
      of
      our variable remuneration plan and the impact of (i) our operations in North
      America and (ii) the increase of our HILA-ex operations.




58




*Brazilian
      Operations*




General
      and administrative expenses for our Brazilian operations were R$ 389.6 million
      in 2004, a 10.8% increase from R$ 351.6 million in 2003 due mainly to the higher
      fees paid to our board of executive officers as part of our variable
      remuneration system.




*HILA
      Operations*




The
      general and administrative expenses for our HILA operations were R$ 130.1
      million for the year ended December 31, 2004, increasing 96.4% from R$ 66.3
      million in the same period in 2003. This was as a result of (i) the consolidated
      administrative expenses in Quinsa of R$ 50.0 million and (ii) a 188.0% increase
      in our HILA-ex expenses, totaling R$ 80.2 million, due to the consolidation
      of
      new operations.




*North
      America*




In
      North America, Labatt’s administrative expenses amounted to R$ 98.2
      million.




***Depreciation
      and Amortization Expenses***




Depreciation
      and amortization expenses increased by 28.9% for the year ended December 31,
      2004 to R$ 541.5 million from R$ 420.0 million in the same period in 2003.
      Brazilian operations’ depreciation and amortization increased by 18.1% for the
      year ended December 31, 2004 to R$ 440.2 million from R$ 372.9 million in 2003.
      This increase was a result of the continuation of our program to install coolers
      at points of sale. HILA operations’ depreciation and amortization increased by
      74.1% for the year ended December 31, 2004 to R$ 82.1 million from R$ 47.1
      million in 2003. Depreciation and amortization in North America amounted to
      R$
      83.9 million.




***Provisions
      for contingencies***




Net
      provisions for contingencies charged to the statement of operations amounted
      to
      R$ 260.2 million in 2004, a 38.4% increase from R$ 187.9 million for the year
      ended December 31, 2003. Provisions for contingencies with respect to Brazilian
      operations were R$ 258.7 million in 2004, mainly comprised of: (i) R$ 141.6
      million for labor provisions; (ii) R$ 74.5 million for ICMS tax credits with
      respect to purchases of property, plant and equipment prior to 1996, which
      are
      under dispute and (iii) R$ 21.2 million related to the termination of certain
      third-party distribution agreements.




Provisions
      for contingencies for HILA operations were R$ 1.5 million in 2004, down R$
      45.3
      million from R$ 43.8 million in 2003.




***Other
      operating income (expense), net***




Other
      (net) operating expenses for the year ended December 31, 2004 were R$ 420.9
      million, 75.3% higher than expenses of R$ 240.1 million for the year ended
      December 31, 2003. Brazilian operations contributed with income of R$ 115.3
      million compared to R$ 230.7 million in expenses in 2003, related mostly to:
      (i)
      income of R$ 193.3 million from tax incentives; (ii) income of R$ 163.5 million
      derived from the impact of exchange rate variation over AmBev’s investments
      outside of Brazil. The impact of the exchange rate variation on investment
      in
      Labatt was R$ 259.4 million while negative impacts arising from the exchange
      rate variation in other investments totaled R$ 163.5 million; (iii) a loss
      of R$
      210.7 million related to the amortization of goodwill and (iv) a loss of R$
      67.7
      million stemming from the levy of PIS/COFINS on other operating
      income.




Other
      operating expenses for HILA operations were R$ 88.2 million for the year ended
      December 31, 2004 compared to R$ 9.4 million of expenses for the same period
      in
      2003.




North
      America had expenses of R$ 448.2 million for the year ended December 31, 2004,
      mainly explained by the goodwill amortization incurred through the incorporation
      of Labatt into AmBev.




59




***Net
      Financial Income (Expenses)***




Our
      financial income consists of realized and unrealized gains from financial
      instruments, foreign exchange gains (losses) on investments, financial income
      on
      cash equivalents and others. Our financial expenses consist of foreign exchange
      gains (losses) on loans, realized and unrealized losses from financial
      instruments, interests and charges on loans, taxes on financial transactions,
      interest on contingencies and others.




We
      enter into hedging transactions to address AmBev’s Brazilian foreign currency
      debt exposure, which involve cash investments in U.S. dollar-linked assets,
      as
      well as the use of swaps and derivatives. As a result of Brazilian accounting
      requirements, volatility in the *real* /U.S.
      dollar exchange rate and interest rates can cause significant variations in
      financial income and expenses.




Financial
      income for the year ended December 31, 2004 was R$ 339.2 compared to financial
      income of R$ 601.8 million in the same period in 2003, primarily due to the
      change in the financial income derived from our Brazilian operations, which
      posted a loss of R$ 654.4 million in 2004 compared to a gain of R$ 107.7 million
      in 2003. This change is a result of the requirement of Brazilian GAAP that
      financial assets related to derivative instruments used in hedging operations
      should be accounted for by the lesser of the book value and the market value.
      A
      significant drop in the exchange coupon and in the country risk between the
      fourth quarter of 2002 and the second quarter of 2003 led AmBev to register
      significant unrealized gains during these periods. Therefore, the financial
      income achieved in 2003 principally reflected the volatility generated in the
      Brazilian capital markets due to presidential elections in 2002.




Financial
      expenses for the year ended December 31, 2004 were R$ 1,115.6 million compared
      to R$ 508.7 million in the same period in 2003. This difference can be explained
      by a higher debt balance and the accounting impact of hedging transactions
      in
      2004. The financial expenses of the HILA operations were R$ 84.5 million for
      the
      year ended December 31, 2004 compared to R$ 14.7 million in 2003. North America
      had net financial expenses of R$ 37.4 million for the year ended December 31,
      2004.




***Operating
      income***




Operating
      income increased by 10.1% for the year ended December 31, 2004 to R$ 2,163.3
      million from R$ 1,964.9 million in the same period in 2003.




***Non-Operating
      income (expense), net***




Non-operating
      expenses increased by 231.6% for the year ended December 31, 2004 to R$ 333.8
      million from expenses of R$ 100.7 million in the same period in 2003. Brazilian
      operations’ non-operating expenses amounted to R$ 129.6 million for the year
      ended December 31, 2004, mainly as a result of a R$ 37.0 million expense related
      to losses on the sale of fixed assets and a R$ 86.7 million expense related
      to
      Quinsa’s share buyback programs, which, despite increasing our stake in Quinsa,
      had a negative effect on Quinsa’s shareholders’ equity because of the difference
      between the market value and book value of Quinsa’s shares. HILA operations had
      non-operating expenses of R$ 5.5 million. North America had non-operating
      expenses of R$ 198.7 million, primarily resulting from severance expenses of
      240
      former Labatt employees, related to the restructuring of Labatt’s administrative
      activities.




***Income
      tax benefit (expense)***




Our
      consolidated income tax and social contribution for the year ended December
      31,
      2004 was a charge of R$ 511.8 million, up 20.0% from R$ 426.1 million in 2003.
      At the nominal tax rate of 34%, income tax for the year ended December 31,
      2004
      would have amounted to R$ 570.2 million. Our effective income tax rate in the
      year ended December 31, 2004 was positively affected by the benefit from tax
      deductible distribution of interest attributed to shareholders’ equity (R$ 270.0
      million) and non-taxable equity gains attributable to subsidiaries (R$ 65.7
      million). The effect of R$ 155.8 million of income taxes and social contribution
      on results of Labatt negatively affected our effective tax rate.




60




***Profit
      sharing and contributions***




Provision
      for employee and management profit sharing increased to R$ 152.4 million for
      the
      year ended December 31, 2004 from R$ 23.6 million in the same period in 2003.
      In
      2003, as AmBev’s corporate goals were not met, amounts under our profit sharing
      plan were paid only to employees from the top performing industrial, sales
      and
      distribution units and none were paid to administrative employees. In 2004,
      as
      AmBev’s corporate goals were met, our administrative employees were entitled to
      bonuses under our profit sharing plan. See “Directors, Senior Management and
      Employees—Compensation—Profit Sharing Plan”.




***Minority
      interest***




Minority
      shareholders in our subsidiaries shared in gains of R$ 3.8 million for the
      year
      ended December 31, 2004 compared to gains of R$ 2.9 million in
      2003.




***Net
      Income***




Net
      income decreased by 17.7% for the year ended December 31, 2004 to R$ 1,161.5
      million from R$ 1,411.6 million in the same period in 2003.




For
      inflation, currency and governmental policy risks that may have a material
      impact on our operations and investments, see "Risk Factors—Risk Relating to
      Brazil and Other Countries In Which We Operate".




For
      descriptions of all material transactions involving related parties, see "Major
      Shareholders and Related Party Transactions—Material Related Party
      Transactions".




**Liquidity
      and Capital Resources**




The
      information in this section refers to the years 2005, 2004 and 2003. Our primary
      sources of liquidity have historically been cash flows from operating activities
      and borrowings. Our material cash requirements have included the
      following:




·
            the
                servicing of our indebtedness;·
            capital
                expenditures;·
            our
                share buyback program;·
            payments
                of dividends and interest attributable to shareholders’ equity;·
            increases
                in ownership of our subsidiaries or companies in which we have equity
                investments; and·
            investments
                in companies participating in the brewing, soft drink and malting
                industries.




Our
      cash and cash equivalents and short-term investments at December 31, 2005,
      2004,
      and 2003 were R$ 1,096.3 million, R$ 1,505.4 million, and R$ 2,534.2 million,
      respectively. The decrease in the amount in our cash position at the end of
      2005
      compared to the end of 2004 was mainly due to dividend payments, share buybacks
      and debt repayment. The decrease in our cash position at the end of 2004
      compared to the end of 2003 was principally due to the programs we launched
      during 2004, pursuant to which R$ 1,609.6 million of shares were repurchased,
      and the dividend payments of R$ 602.9 million, reflecting management’s decision
      to reduce the amount of cash and cash equivalents on hand in light of our
      increased comfort in accessing the capital markets.




In
      connection with the transaction of Quinsa, as descrined in the section "History
      and development of the Company—Interest in Quinsa", announced on April 13, 2006,
      we raised debt in Brazilian Reais, by issuing R$ 2,065,080,000 in debentures
      on
      August 7, 2006. See "Liquidity and Capital Resources—Borrowings".




61




We
      believe that cash flows from operating activities, available cash and cash
      equivalents and short-term investments, along with our derivative instruments
      and our access to borrowing facilities, will be sufficient to fund our capital
      expenditures, debt service and dividend payments going forward.




**Cash
      Flows**




***Operating
      activities***




Our
      cash flows from operating activities increased 21.4% to R$ 4,149.5 for the
      year
      ended December 31, 2005 from R$ 3,418.6 million for the same period in 2004
      due
      to operational growth in our Brazilian, HILA and twelve months of our North
      American operations when compared to four months in 2004.




Our
      cash flows from operating activities increased 35.2% to R$ 3,418.6 for the
      year
      ended December 31, 2004 from R$ 2,527.6 million for the same period in 2003
      due
      to operational growth in our Brazilian operations and our HILA operations,
      and
      the merger of Labatt into AmBev.




***Investing
      activities***




Cash
      flows used in our investing activities for the year ended December 31, 2005
      totaled R$ 1,619.3 million, compared to cash flows generated in investing
      activities of R$ 110.7 million for the same period in 2004. This was due mainly
      to (i) acquisition of fixed assets and (ii) our decision to reduce our positions
      in securities in 2004.




Cash
      flows generated in our investing activities for the year ended December 31,
      2004
      totaled R$ 110.7 million, compared to cash flows used in investing activities
      of
      R$ 2,014.8 million for the same period in 2003. This was due mainly to (i)
      our
      decision to reduce our positions in securities in 2004; (ii) a reduction in
      cash
      used to acquire new investments compared to our acquisition of Quinsa in 2003;
      and (iii) the consolidation of Labatt’s initial cash position, which offset
      certain investment requirements. This change was partially offset by higher
      capital expenditures and the repurchase of shares by Quinsa during
      2004.




***Financing
      activities***




Cash
      flows used in financing activities for the year ended December 31, 2005 amounted
      to R$ 2,973.9 million compared to R$ 3,433.9 million for the same period in
      2004. This was principally due to dividend payments and share
      buybacks.




Cash
      flows used in financing activities for the year ended December 31, 2004 amounted
      to R$ 3,433.9 million compared to R$ 346.7 million for the same period in 2003.
      This was principally due to the full amortization of R$ 974.7 million of a
      yen-denominated syndicated loan and an increase in payouts mainly through our
      share buyback programs.




As
      of December 31, 2005, our outstanding debt totaled R$ 7,203.6 million (of which
      R$ 1,209.4 million was short-term debt). Our debt consisted of R$ 794.7 million
      of *real* -denominated
      debt and R$ 6,408.9 million of foreign currency-denominated debt.




The
      table below shows the profile of our debt instruments:








**AmBev’s
                  Profile as of December 31, 2005****Debt
                  Instruments**
              
              **2006**
              
              **2007**
              
              **2008**
              
              **2009**
              
              **2010**
              
              **Thereafter**
              
              **Total***(R$
                  in millions, except percentages)***U.S.$
                  Denominated Debt (Fixed Rate)**Notional
                  Amount
              
              
              582.2
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,340,7
              
              
              2,922.9Average
                  Pay Rate
              
              
              9.61
              %**BNDES
                  Currency Basket Debt (Fixed Rate)**U.S.
                  $ Denominated Debt (Fixed Rate)
              
              
              16.0
              
              
              23.4
              
              
              22.5
              
              
              8.8
              
              
              8.1
              
              
              0.7
              
              
              79.5Average
                  Pay Rate
              
              
              3.50
              %**International
                  Debt**U.S.
                  $ Denominated Debt (Fixed Rate)
              
              
              245.3
              
              
              206.9
              
              
              181.7
              
              
              50.0
              
              
              41.6
              
              
              97.4
              
              
              822.9Average
                  Pay Rate
              
              
              4.41
              %**International
                  Debt**Other
                  Latin American Currency (Fixed Rate)
              
              
              165.9
              
              
              17.8
              
              
              117.4
              
              
              —
              
              
              178.6
              
              
              32.4
              
              
              512.1Average
                  Pay Rate
              
              
              10.10
              %**International
                  Debt**C$
                  Denominated Debt (Fixed Rate)
              
              
              4.8
              
              
              —
              
              
              479.8
              
              
              —
              
              
              1,408.2
              
              
              178.6
              
              
              2,071.4Average
                  Pay Rate
              
              
              4.57
              %**R$
                  Denominated Debt (Floating Rate - TJLP)**Notional
                  Amount
              
              
              104.2
              
              
              134.3
              
              
              120.8
              
              
              59.2
              
              
              47.9
              
              
              —
              
              
              466.4Average
                  Pay Rate (TJLP +)
              
              
              2.50
              %**R$
                  Debt - Working Capital**Notional
                  Amount
              
              
              1.6
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1.6Average
                  Pay Rate (CDI)
              
              
              18.7
              %**R$
                  Debt - ICMS (Fixed Rate)**Notional
                  Amount
              
              
              89.5
              
              
              147.1
              
              
              90.2
              
              
              —
              
              
              —
              
              
              —
              
              
              326.8Average
                  Pay Rate
              
              
              4.77
              %**Total**
              
              
              **1,209.5**
              
              
              **529.5**
              
              
              **1,012.4**
              
              
              **118.0**
              
              
              **1,684.4**
              
              
              **2,649.8**
              
              
              **7,203.6**




62




As
      of December 31, 2004, our outstanding debt totaled R$ 7,810.7 million (of which
      R$ 3,443.1 million was short-term debt, including R$ 1,289.3 million of the
      current portion of long-term debt). Our debt consisted of R$ 1,000.9 million
      of *real* -denominated
      debt and R$ 6,809.8 million of foreign currency-denominated debt.




As
      of December 31, 2003, our outstanding debt totaled R$ 5,980.4 million (of which
      R$ 1,976.1 million was short-term debt, including R$ 1,427.4 million of the
      current portion of long-term debt). Our debt consisted of R$ 901.5 million
      of *real* -denominated
      debt and R$ 5,078.9 million of foreign currency-denominated debt.




***Restrictions
      on the transfer of funds from subsidiaries***




Certain
      of Labatt’s debt agreements contain clauses that restrict the transfer of funds
      to related companies, including AmBev. Under the terms of these agreements,
      Labatt may not distribute, cash in the following situations:




(i)  if
      Leverage Ratio (aggregate indebtedness to EBITDA) exceeds 3 to 1 after such
      payment; or




(ii)  Payments
      exceed 100% of accumulated net income, excluding extraordinary gains and losses,
      and unusual or non-recurring items as of April 1, 2004.




Labatt’s
      current leverage ratio does not exceed 3 to 1. We do not expect these
      restrictions to affect our ability to meet our cash obligations.




***Borrowings***




Most
      of our borrowings are for general use, based upon strategic capital structure
      concerns. Although seasonal factors affect the business, they have little effect
      on our borrowing requirements. We are linked to different interest rates, the
      most relevant being fixed - for the notes AmBev 11 and AmBev 13 -, TJLP for
      BNDES loans and Canadian Banker’s acceptance for Canadian Debt. For further
      information, please refer to Note 11 of our Consolidated Financial Statements.
      The following tables set forth our net debt consolidated position as of December
      31, 2005, 2004 and 2003:




**Net
                Debt Consolidated Position****2005**
            
            **2004**
            
            **2003****LC****(1)**
            
            **FC****(2)**
            
            **Total**
            
            **LC****(1)**
            
            **FC****(2)**
            
            **Total**
            
            **LC****(1)**
            
            **FC****(2)**
            
            **Total***(R$
                in million)*Short-term
                debt(3)
            
            
            195.1
            
            
            1,014.3
            
            
            1,209.4
            
            
            503.2
            
            
            2,939.9
            
            
            3,443.1
            
            
            262.0
            
            
            1,714.1
            
            
            1,976.1Long-term
                debt
            
            
            599.6
            
            
            5,394.6
            
            
            5,994.2
            
            
            497.7
            
            
            3,869.9
            
            
            4,367.6
            
            
            639.5
            
            
            3,364.8
            
            
            4,004.3Total
            
            
            794.7
            
            
            6,408.9
            
            
            7,203.6
            
            
            1,000.9
            
            
            6,809.8
            
            
            7,810.7
            
            
            901.5
            
            
            5,078.9
            
            
            5,980.4




*Amounts
      may not add due to rounding.*




(1)
            LC
                = Local Currency.




(2)
            FC
                = Foreign Currency.




(3)
            Includes
                the current portion of long-term debt.




63




***Short-term
      debt***




As
      of December 31, 2005, our short-term debt totaled R$ 1,209.4 million, 83.7%
      of
      which was denominated in foreign currencies.




As
      of December 31, 2004, our short-term debt totaled R$ 3,443.1 million, 86.7%
      of
      which was denominated in foreign currencies. Most of our short-term foreign
      debt
      consisted of Labatt’s bank debt of R$ 1,911.7 million, which matured and was
      fully refinanced in the last quarter of 2005. On July 28, 2004, we paid in
      full
      our yen-denominated syndicated loan in the amount of R$ 974.7 million, net
      of
      hedge effects on such debt.




As
      of December 31, 2003, our short-term debt totaled R$ 1,976.1 million, consisting
      primarily of the current portion of our yen-denominated syndicated loan which
      matured in August 2004. As of December 31, 2003, 86.7% of our short-term debt
      was denominated in foreign currencies, with an annual weighted average interest
      rate of approximately 7.0%. The yen-denominated syndicated loan represented
      53.8% of our total short-term debt.




64




***Long-term
      Debt***




As
      of December 31, 2005, our long-term debt, excluding the current portion of
      long-term debt, totaled R$ 5,994.2 million, of which R$ 599.6 million was
      denominated in *Reais* .
      The
      remainder was denominated primarily in U.S. dollars.




**Long
                Term**
              **Debt
                Maturity****(1)**2007
            
            
            529.52008
            
            
            1,012.42009
            
            
            118.02010
            
            
            1,684.52011
            
            
            1,437.82012
            
            
            32.42013
                and later
            
            
            1,179.6**Total**
            
            
            **5,994.2**







*Amounts
                may not add due to rounding.*(1)
            Excludes
                the current portion of long-term
                debt.




In
      accordance with our foreign currency risk management policy, we have entered
      into forward and cross-currency interest rate swap contracts in order to
      mitigate currency and interest rate risks. See “Quantitative and Qualitative
      Disclosures About Market Risk” for our policy with respect to mitigating foreign
      currency and interest rate risks through the use of financial instruments and
      derivatives.




As
      of December 31, 2004, our long-term debt, excluding the current portion of
      long-term debt, totaled R$ 4,367.6 million, of which R$ 497.7 million was
      denominated in *Reais* .
      The
      remainder was denominated primarily in U.S. dollars. The current portion of
      our
      local long-term debt totaled R$ 1,289.3 million as of December 31,
      2004.




As
      of December 31, 2003, our long-term debt, excluding the current portion of
      long-term debt, totaled R$ 4,004.3 million, of which R$ 639.5 million was
      denominated in *Reais* .
      The
      remainder was denominated primarily in U.S. dollars. The current portion of
      our
      local long-term debt totaled R$ 1,427.4 million as of December 31,
      2003.




In
      December 2001, CBB issued U.S.$500 million 10.5% Notes due 2011, fully
      guaranteed by AmBev. This offering significantly increased the average maturity
      of our outstanding debt. On October 4, 2002, we completed an SEC registered
      exchange offer for these notes. These notes contain certain covenants and events
      of default which, if triggered, cause accelerated amortization. The proceeds
      of
      the syndicated loans and the notes issued in 2001 were used principally to
      repay
      short-term debt, but also to finance part of AmBev’s capital expenditure program
      and for general corporate purposes. In September 2003, CBB issued U.S.$500
      million 8.75% Notes due 2013, fully guaranteed by AmBev. The transaction was
      priced at 99.674% of the nominal principal amount with a coupon rate of 8.75%.
      These notes contain certain covenants and events of default which, if triggered,
      cause accelerated amortization. The proceeds of the notes issued in 2003 were
      used principally to repay short-term debt, to finance part of AmBev’s capital
      expenditure program, and also for general corporate purposes. On September
      15,
      2004, we completed an SEC registered exchange offer for these notes. On May
      31,
      2005, upon the completion of the merger of CBB into AmBev, AmBev became the
      successor to CBB under the indentures governing both the 2011 notes and the
      2013
      notes. Neither of these notes have any financial covenants that might limit
      AmBev’s ability to take on additional debt.




As
      of December 31, 2005, our local currency long-term debt borrowings consisted
      primarily of long-term plant expansion and other loans from governmental
      agencies including the Brazilian Economic and Social Development Bank (“BNDES”),
      and BNDES programs, including the Fund for Financing the Acquisition of
      Industrial Machinery and Equipment (“FINAME”), and the Financing Fund for
      Studies and Projects (“FINEP”).




65




As
      of December 31, 2004, our local currency long-term debt borrowings consisted
      primarily of long-term plant expansion and other loans from governmental
      agencies including the BNDES, and BNDES programs, including FINAME and FINEP.




As
      of December 31, 2003, our local currency long-term debt borrowings consisted
      primarily of long-term plant expansion and other loans from governmental
      agencies including the BNDES, and BNDES programs, including FINAME and
      FINEP.




On
      June 8, 2006, our Board of Directors approved a public issuance of debentures
      denominated in *reais* in the
      Brazilian market of up to R$2.6 billion. The issuance was registered with the
      CVM and its final amount was R$ 2,065,080,000. Proceeds of such issuance, which
      was closed on August 7, 2006, were used totally to finance the purchase of
      shares in Quinsa. See “History and Development of the Company —Interest on
      Quinsa” and “Capital Investment Program”.




A
      substantial portion of the financings incurred by Quinsa’s subsidiaries in
      Argentina is denominated in U.S. dollars. The devaluation of the Argentine
      Peso
      and the economic crisis in Argentina, mainly in 2002, restricted the ability
      of
      these subsidiaries to generate sufficient cash flows to meet the obligations
      falling due on the dates originally determined for liabilities denominated
      in
      foreign currency. The management of Quinsa and its subsidiaries renegotiated
      the
      maturity terms with financial institutions.




As
      of December 31, 2004, we reclassified approximately U.S.$4.7 million of Quinsa’s
      long-term debt, with respect to which Quinsa was not in compliance with certain
      covenants, to current liabilities. At December 31, 2003, Quinsa was in default
      of certain loan covenants. Quinsa’s management concluded the process of
      renegotiating the terms of the affected loans. As of December 31, 2003, we
      reclassified approximately U.S.$4.2 million of Quinsa’s long-term debt, with
      respect to which Quinsa was not in compliance with certain covenants, to current
      liabilities.




Quinsa’s
      results of operations are proportionately consolidated in our financial
      statements for 2005, 2004 and 2003.




***Secured
      debt***




Certain
      loans, provided by BNDES and FINEP, are secured by some of our facilities and
      some of our equipment (mainly refrigerators).




***Sales
      tax deferrals and other tax credits***




We
      currently participate in several programs by which a portion of payments of
      ICMS
      tax due from sales generated by specific production facilities are deferred
      for
      periods of generally five years from their original due date. The total amount
      deferred as of December 31, 2005, including ICMS financing, was R$ 698.9
      million, as disclosed in Note 11 to our financial statements. Percentages
      deferred typically range from 40% to 100% over the life of the program. Balances
      deferred generally accrue interest and are partially inflation indexed, with
      adjustments generally set at 60% to 80% of a general price index. The amount
      of
      sales taxes deferred as of December 31, 2005, R$ 372.1 million, included a
      current portion of R$ 19.5 million (classified under other taxes and
      contributions payable), and R$ 352.6 million payable thereafter. The remaining
      R$ 326.8 million relates to ICMS financing. We also participate in ICMS
      value-added tax credit programs offered by various Brazilian states which
      provide tax credits to offset ICMS value-added tax payable. In return, we are
      committed to meeting certain operational requirements including, depending
      on
      the State, production volume and employment targets, among others. The grants
      are received over the lives of the respective programs. In the years ended
      December 31, 2005 and 2004, we recorded R$ 151.8 million and R$ 193.3 million,
      respectively, of tax credits as gains on tax incentive programs. The benefits
      granted are not subject to withdrawal in the event that we do not meet the
      program’s targets; however, future benefits may be withdrawn.




The
      State of  São Paulo has challenged in the Brazilian Supreme Court state
      laws upon which certain of the above benefits have been granted, on the basis
      that they constitute tax benefits created without certain approvals required
      under Brazilian tax laws and regulations, which would render such state laws
      unconstitutional. While there has been no decisions by the Brazilian Supreme
      Court declaring any such state laws unconstitutional, no assurance can be given
      that the above sales tax deferrals and tax credit programs would not be
      suspended in the future as a result of an adverse decision of the Brazilian
      Supreme Court.




66




***Capital
      Investment Program***




In
      2005, consolidated capital expenditures on property, plant and equipment totaled
      R$ 1,369.5 million consisting of R$ 924.1million in Brazil and HILA-ex, R$
      166.6
      million related to our proportional consolidation of Quinsa and R$ 278.8 million
      related to the approximately four months of consolidation of Labatt. These
      expenditures primarily included investments in quality controls, automation,
      modernization and replacement of packaging lines, warehousing for direct
      distribution, coolers, expenditures for the replacement of bottles and crates,
      and continued investments in information technology.




As
      of December 31, 2004, our investments in subsidiaries and affiliates, including
      acquisitions of intangible assets net of cash, totaled R$ 170.2 million. These
      investments are primarily related to the acquisition of our economic interest
      in
      Embodom.




In
      2003, capital expenditures on property, plant and equipment totaled R$ 862.2
      million, consisting of R$ 809.8 million in Brazil and HILA-ex, and R$ 52.4
      million related to our proportional consolidation of Quinsa. These capital
      expenditures primarily included investments in quality controls, automation,
      modernization, replacement of packaging lines, warehousing for direct
      distribution, coolers, expenditures for the replacement of bottles and crates,
      and continued investments in information technology.




As
      of December 31, 2003, our investments in subsidiaries and affiliates, including
      acquisitions of intangible assets net of cash, totaled R$ 1,745.3 million,
      which
      included: (i) the R$ 1,429.0 million cash disbursement as purchase price for
      our
      initial interest in Quinsa in 2003; (ii) the additional R$ 249.6 million cash
      disbursement used to purchase an additional 12.0 million Class B Quinsa shares
      on the open market, increasing our economic interest in Quinsa to 49.66%; and
      (iii) the acquisition of our interests in our Peruvian and Ecuadorian
      assets.




We
      continually evaluate possible acquisitions, products and technologies that
      are
      complementary to our business and any such acquisitions or investments may
      be
      financed with additional debt and/or cash flow, which has been the case
      historically. We invested approximately U.S.$50 million in the Dominican
      Republic, including the acquisition of 51% of the capital of Embodom that
      includes a soft drink facility and distribution network, and construction of
      a
      beer facility in Santo Domingo. The new beer facility was fully operational
      in
      the Dominican Republic during the third quarter of 2005.




We
      also constructed a brewery in Peru, which started operations during the second
      quarter of 2005. Total investments in the brewery amounted to approximately
      U.S.$38.4 million including production facilities, working capital and
      pre-operating expenses.




On
      April 13, 2006 AmBev announced that it has entered into an agreement with BAC
      pursuant to which BAC has agreed to sell all its remaining shares in Quinsa
      to
      AmBev for a total purchase price of approximately US$1.2 billion, subject to
      certain adjustments, including dividends and interest. The acquisition closed
      on
      August 8, 2006 was financed through a mix of internal and external sources,
      a
      combination of cash flow and the issuance of debt in the local market. With
      the
      closing of the transaction, AmBev’s equity interest in Quinsa increased from
      56.72% to 91.18% of its total share capital. The adjusted price paid to BAC
      was
      US$ 1,252,572,033. See “Information on the Company—History and Development of
      the Company—Interest in Quinsa”.




**Research
      and Development**




The
      company maintains a research and development center in Guarulhos in order to
      assure continuous product innovation and yearly increases in
      efficiency.




67




**Trend
      Information**




For
      detailed information regarding the latest trends in our business, please refer
      to “Year ended December 31, 2005 Compared with Year ended December 31,
      2004”




**Off-balance
      Sheet Arrangements**




We
      have a number of off-balance sheet items which have been disclosed elsewhere
      in
      this annual report. They include the following:




·
            Contingencies
                which represent possible, though not probable, risk of loss have
                not been
                provided for in our balance sheet and amount to R$ 4,557.0 million,
                which
                have been disclosed in “—Liquidity and Capital Resources—Commitments and
                contingencies”. We believe that our estimates are based on reasonable
                assumptions and assessments of external legal counsel, but should
                the
                worst case scenario develop, subjecting us to losses in all cases,
                our net
                impact on the statement of operations would be an expense for this
                amount;·
            Future
                commitments with suppliers of R$ 536.7million, related primarily
                to
                industrial and distribution system investments, which have been disclosed
                in “—Liquidity and Capital Resources—Commitments and contingencies”;·
            As
                described in “—Critical Accounting Policies”, for Brazilian GAAP purposes
                we do not include the assets and liabilities of FAHZ, although we
                do so
                for U.S. GAAP purposes. While we record the benefit obligation for
                Brazilian GAAP, the remaining assets and liabilities are off-balance
                sheet
                for the purposes of Brazilian GAAP financial statements. See Note
                15 (c)
                of our consolidated financial statements for more information;·
            On
                April 13, 2006 AmBev announced that it has entered into an agreement
                with
                BAC pursuant to which BAC agreed to sell all its remaining shares
                in
                Quinsa to AmBev for a total purchase price of approximately US$1.2
                billion, subject to certain adjustments, including dividends and
                interest.
                With the closing of the transaction, which took place on August 8,
                2006,
                AmBev’s equity interest in Quinsa increased from 56.72% to 91.18% of its
                total share capital. The adjusted price paid to BAC was US$ 1,252,572,033.




We
      have no special purpose vehicles or other unconsolidated interests in which
      we
      have material commitments, guarantees or contingencies.




***Commitments
      and contingencies***




The
      following table and discussion provide additional disclosure regarding our
      material contractual obligations and commercial commitments as of December
      31,
      2005:




**Payments
                due by period****Contractual
                Obligations**
            
            **Total**
            
            **Less
                than 1 year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than 5 years****(in
                millions of*****Reais*****)**Long-term
                debt
            
            
            6,205.3
            
            
            211.1
            
            
            1,541.9
            
            
            1,802.5
            
            
            2,649.8Sales
                tax deferrals
            
            
            372.1
            
            
            19.5
            
            
            55.1
            
            
            60.1
            
            
            237.4Pension
                plan and commitments with suppliers
            
            
            536.7
            
            
            533.4
            
            
            3.3
            
            
            -
            
            
            -Other
                post-retirement liabilities
            
            
            2,830.7
            
            
            245.7
            
            
            514.7
            
            
            550.1
            
            
            1,520.2**Total
                contractual cash commitments**
            
            
            **7,544.1**
            
            
            **799.3**
            
            
            **1,676.9**
            
            
            **1,946.1**
            
            
            **3,121.8**







*
            The
                above table does not reflect contractual commitments discussed in
                “Off-Balance Sheet Arrangements”.




68




Pursuant
      to the Put and Call Options, AmBev had a call option to acquire 373.5 million
      Quinsa Class A Shares held by BAC in exchange for newly issued shares of AmBev,
      and BAC had a put option to sell to AmBev the 373.5 million Quinsa Class A
      Shares held by BAC in exchange for newly issued shares of AmBev.  The
      Quinsa Put and Call Options are no longer in place as a result of the cash
      purchase by AmBev of BAC’s remaining shareholding in Quinsa. See “—Off-balance
      Sheet Arrangements”.




We
      are subject to numerous commitments and contingencies with respect to tax,
      labor, distributors and other claims. To the extent that we believe these
      contingencies will probably be realized, they have been recorded in the balance
      sheet. We have estimated the total exposures of possible (but not probable)
      losses, which are not recorded as liabilities, to be R$ 4,557.0 million as
      of
      December 31, 2005. These are not considered commitments. We believe that our
      estimates are based on reasonable assumptions and assessment of external legal
      counsel, but should the worst case scenario develop, subjecting us to losses
      in
      all cases, our net impact on the statement of operations would be an expense
      for
      this amount.




69




**Directors,
      Senior Management and Employees**




**DIRECTORS
      AND SENIOR MANAGEMENT**




The
      Board of Directors oversees AmBev’s executive officers. The Board of Directors
      is comprised of three to 15 members who must be shareholders of AmBev and
      provides the overall strategic direction of AmBev. Directors are elected at
      general shareholders’ meetings for a three-year term, re-election being
      permitted. Day-to-day management is delegated to the executive officers of
      AmBev, who must number at least two but no more than 15. The Board of Directors
      appoints executive officers for a three-year term, re-election being permitted.
      The AmBev shareholders’ agreement regulates the election of directors of AmBev
      by the controlling shareholders. See “Major Shareholders and Related Party
      Transactions—AmBev Shareholders’ Agreement—Management of AmBev”.




**Directors**




The
      following table sets forth information with respect to the directors of
      AmBev:




**Board
      of Directors** (1)




**Name**
            
            **Age****(2)**
            
            **Position**
            
            **Director
                of**
              **AmBev
                Since**
            
            **Term**
              **Expires**Victório
                Carlos De Marchi
            
            67
            
            Co-Chairman
                and Director
            
            1999
            
            2008Carlos
                Alves de Brito
            
            46
            
            Co-Chairman
                and Director
            
            2006
            
            2008Marcel
                Herrmann Telles
            
            56
            
            Director
            
            1999
            
            2008Carlos
                Alberto da Veiga Sicupira
            
            58
            
            Director
            
            1999
            
            2008José
                Heitor Attilio Gracioso
            
            74
            
            Director
            
            1999
            
            2008Roberto
                Herbster Gusmão
            
            83
            
            Director
            
            1999
            
            2008Vicente
                Falconi Campos
            
            65
            
            Director
            
            1999
            
            2008Luis
                Felipe Pedreira Dutra Leite
            
            40
            
            Director
            
            2005
            
            2008Johan
                M.J.J. Van Biesbroeck
            
            49
            
            Director
            
            2005
            
            2008**Alternate
                Members**Jorge
                Paulo Lemann
            
            66
            
            Alternate
                Director
            
            1999
            
            2008Roberto
                Moses Thompson Motta
            
            48
            
            Alternate
                Director
            
            1999
            
            2008







(1)
            Victório
                Carlos De Marchi, Co-Chairman of the Board of Directors of AmBev,
                was
                appointed by FAHZ, the former controlling shareholder of Antarctica,
                while
                Carlos Alves de Brito was appointed by InBev and is also a Chief
                Executive
                Officer of InBev S.A./N.V. InBev appointed five additional
                directors—Marcel Herrmann Telles, Carlos Alberto Sicupira, Luis Felipe
                Pedreira Dutra Leite, Johan M.J.J. Van Biesbroeck and Vicente Falconi
                Campos. FAHZ appointed two additional directors—José Heitor Attílio
                Gracioso and Roberto Herbster Gusmão. The alternate members of the Board
                of Directors of AmBev are appointed in order to replace, if and when
                necessary, any of the directors.(2)
            Age
                as at May 31, 2006.The
                following are brief biographies of each of AmBev’s
                directors:




**Victório
      Carlos De Marchi.** Mr. De
      Marchi is Co-Chairman of the Board of Directors of AmBev. Mr. De Marchi joined
      Companhia Antarctica Paulista in 1961 and held various positions during his
      tenure, including Chief Executive Officer from 1998 to April 2000. Mr. De Marchi
      was also president of the Brewing Industry National Association ( *Sindcerv* )
      until
      February 2002 and is a party to the Orientation Committee of FAHZ. He is also
      a
      board member of Quinsa. Mr. De Marchi has a degree in economics from *Faculdade
      de Economia, Finanças e Administracão de São Paulo* and a
      law degree from *Faculdade
      de Direito de São Bernardo do Campo* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017,
      4th floor, São Paulo, Brazil.




70




**Carlos
      Alves de Brito.** Mr.
      Brito is Co-Chairman of the Board of Directors of AmBev. He also serves, since
      December, 2005, as Chief Executive Officer of InBev. He joined Brahma in 1989
      and has held various management positions during his tenure. He served as Chief
      Operating Officer of AmBev from 1999 to 2003, as Chief Executive Officer for
      Latin America in 2004 and as Chief Executive Officer for North America in 2005.
      Mr. Brito holds a degree in mechanical engineering from the *Universidade
      Federal do Rio de Janeiro* and an
      MBA from Stanford University. His principal business address is Brouwerijplein
      1, 3000 city of Leuven, Belgium.




**Marcel
      Herrmann Telles.** Mr.
      Telles is a member of the Board of Directors of AmBev. He served as Chief
      Executive Officer of Companhia Cervejaria Brahma from 1989 to 1999. Currently,
      he is also a member of the Board of Directors of InBev, Lojas Americanas and
      AmBev. Mr. Telles has a degree in economics from *Universidade
      Federal do Rio de Janeiro* and
      attended the Owners/Presidents Management Program at Harvard Business School.
      His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th
      floor, São Paulo, Brazil.




**Carlos
      Alberto da Veiga Sicupira.** Mr.
      Sicupira is a member of the Board of Directors of AmBev. He also served as
      a
      member of the Board of Directors of Brahma from 1990 until 1999. He is also
      a
      board member of InBev, Quinsa and Lojas Americanas S.A. He is also a member
      of
      the Board of Associates of Harvard Business School since 1988. Mr. Sicupira
      has
      a degree in business administration from the *Universidade
      Federal do Rio de Janeiro* and a
      degree from the Harvard Business School. His principal business address is
      Rua
      Dr. Renato Paes de Barros, 1017, 15th floor, São Paulo, Brazil.




**José
      Heitor Attílio Gracioso.** Mr.
      Gracioso is a member of the Board of Directors of AmBev. Mr. Gracioso joined
      Companhia Antarctica Paulista in 1946 and held various positions during his
      tenure. In 1994, Mr. Gracioso was elected to Companhia Antarctica Paulista’s
      Board of Directors and, in 1999, he was elected Chairman of the Board of
      Directors, a position held until April 2000. He holds a degree in marketing
      from *Escola
      Superior de Propaganda de São Paulo* ,
      a
      degree in business administration from *Fundação
      Getúlio Vargas* and a
      degree in law from *Faculdade
      de Direito de São Bernardo do Campo* .
      His
      principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo,
      Brazil.




**Roberto
      Herbster Gusmão.** Mr.
      Gusmão is a member of the Board of Directors of AmBev. He was previously
      Vice-Chairman of the Board of Directors of Companhia Antarctica Paulista from
      1998 until April 2000. Mr. Gusmão was Chief Executive Officer of Cervejaria
      Antarctica-Niger S.A. from 1968 to 1982, and from 1986 to 1997. He was the
      Brazilian Minister for Trade and Industry from 1985 to 1986 and CEO of *Banco
      de Desenvolvimento do Estado de São Paulo* from
      1982 to 1983. Mr. Gusmão was also a professor and founder of graduation and
      post-graduate programs at *Fundação
      Getulio Vargas* from
      1954 to 1969. Mr. Gusmão has a law degree from *Faculdade
      de Direito da Universidade de Minas Gerais* .
      His
      principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo,
      Brazil.




**Vicente
      Falconi Campos.** Mr.
      Campos is a member of the Board of Directors of AmBev. He is also a member
      of
      the Institutional Council of *Instituto
      de Desenvolvimento Gerencial* (“INDG”)
      and is a member of the Board of Directors of Sadia. Mr. Campos is also a
      consultant for the Brazilian government and Brazilian and multinational
      companies such as Grupo Gerdau, Grupo Votorantim and Mercedes-Benz. He holds
      a
      degree in Mining and Metal Engineering from Universidade Federal de Minas
      Gerais, and M.Sc. and Ph.D. degrees from the Colorado School of Mines. His
      principal business address is Av. Contorno, 7962, 10th floor, Belo Horizonte,
      Brazil.




**Luis
      Felipe Pedreira Dutra Leite.** Mr.
      Dutra is a member of the Board of Directors of AmBev. He also serves, since
      January 2005, as Chief Financial Officer of InBev. He joined Brahma in 1990
      and
      has held numerous positions during his tenure, including of Chief Financial
      Officer and Investor Relations Officer of AmBev. Mr. Dutra holds a degree in
      economics from *Universidade
      Cândido Mendes* and
      an
      MBA in financial management from *Universidade
      de São Paulo* .
      His
      principal business address is Brouwerijplein 1, 3000 city of Leuven,
      Belgium.




**Johan M.J.J. Van Biesbroeck.** Mr. Van
      Biesbroeck is a member of the Board of Directors of AmBev. He has been working
      with Interbrew (now InBev) since 1978. He is currently a member of the InBev
      Executive Board of Management, holding the position of Chief Strategy and
      Business Development Officer - the Convergence Committee and has different
      Board
      mandates with InBev affiliates. Mr Van Biesbroeck has a degree in economics
      from
      Katholieke Universiteit Leuven. His principal business address is Brouwerijplein
      1, 3000 Leuven, Belgium.




**Jorge
      Paulo Lemann.** Mr.
      Lemann is an alternate member of the Board of Directors of AmBev and a Board
      member of InBev. He also served as a member of the Board of Dicrectors of Brahma
      from 1990 to 1999. He is a member of the International Advisory Board of
      DaimlerChrysler, a board member of Fundação Estudar and a member of the Harvard
      Business School’s Board of Dean’s Advisors. Mr. Lemann holds a BA degree from
      Harvard University, A.B. His principal business address is Rua Dr. Renato Paes
      de Barros, 1017, 15th floor, São Paulo, Brazil.




71




**Roberto
      Moses Thompson Motta.** Mr.
      Thompson is an alternate member of the Board of Directors of AmBev. He is also
      a
      board member of InBev and Lojas Americanas S.A. He holds a degree in engineering
      from *Pontifícia
      Universidade Católica do Rio de Janeiro* ,
      and an
      MBA from the Wharton School of the University of Pennsylvania. His principal
      business address is Av. Brig. Faria Lima, 3729, 7th floor, São Paulo,
      Brazil.




**Executive
      Officers**




The
      following table sets forth information with respect to the executive officers
      of
      AmBev:




**Name**
            
            **Age****(1)**
            
            **Position**
            
            **Election**
              **Date**
            
            **Term**
              **Expires**Luiz
                Fernando Ziegler de Saint Edmond(2)
            
            40
            
            Chief
                Executive Officer for Latin America
            
            2005
            
            2007Miguel
                Nuno da Mata Patricio(3)
            
            40
            
            Chief
                Executive Officer for North America
            
            2006
            
            2007Jorge
                Luiz Gualberti Martins da Rocha(4)
            
            39
            
            Executive
                Officer for Hispanic Latin America
            
            2006
            
            2007João
                Mauricio Giffoni de Castro Neves
            
            39
            
            Chief
                Financial Officer and Investor Relations Officer
            
            2005
            
            2007Bernardo
                Pinto Paiva
            
            37
            
            Sales
                Executive Officer
            
            2005
            
            2007Carlos
                Eduardo Klützenschell Lisboa
            
            36
            
            Marketing
                Executive Officer
            
            2005
            
            2007Cláudio
                Braz Ferro
            
            51
            
            Industrial
                Executive Officer
            
            2005
            
            2007Francisco
                de Sá Neto
            
            40
            
            Soft
                Drinks Executive Officer
            
            2005
            
            2007Milton
                Seligman
            
            54
            
            Corporate
                Affairs Executive Officer
            
            2005
            
            2007Pedro
                de Abreu Mariani
            
            39
            
            General
                Counsel
            
            2005
            
            2007







(1)
            Age
                as of May 31, 2006.(2)
            Mr.
                Edmond has been an Executive Officer since 2004; he was appointed
                Chief
                Executive Officer for Latin America in 2005.(3)
            Mr.
                Miguel Patricio has been at the Company since 1999; he was appointed
                Chief
                Executive Officer for North America in 2006.(4)
            Mr.
                Jorge Rocha has been at the Company since 1990; he was appointed
                Executive
                Officer for Hispanic Latin America in
                2006.




The
      following are brief biographies of each of AmBev’s executive officers:




**Luiz
      Fernando Ziegler de Saint Edmond.** Mr.
      Edmond is AmBev’s Chief Executive Officer for Latin America. He joined the
      Company in 1990 in the first group of trainees of Brahma and held various
      positions in the Distribution, Commercial and Direct Distribution Departments.
      He was Sales Officer from 2002 to 2004. Mr. Edmond has an engineering degree
      from *Universidade
      Federal do Rio de Janeiro* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Miguel
      Nuno da Mata Patricio.** Mr.
      Patricio is the Chief Executive Officer for North America. He joined the Company
      in 1999. Mr. Patricio has a degree in business administration from *Fundação
      Getúlio Vargas* in São
      Paulo. His principal business address is Rua Dr. Renato Paes de Barros, 1017,
      4th floor, São Paulo, Brazil.




72




**João
      Maurício Giffoni de Castro Neves.** Mr.
      Neves is AmBev’s Chief Financial Officer and Investor Relations Officer. He
      began working for Brahma in 1996, where he served in various departments, such
      as Mergers and Acquisitions, Treasury, Investor Relations, Business Development,
      Technology and Shared Services, and Carbonated Soft Drinks and Non-Alcoholic
      Non-Carbonated Beverages. He is also a board member of Quinsa. He has a degree
      in engineering from *Pontifícia
      Universidade Católica do Rio de Janeiro* ,
      and
      holds an MBA from the University of Illinois. His principal business address
      is
      Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, Brazil.




**Jorge
      Luiz Gualberti Martins da Rocha.** Mr.
      Rocha is Executive Officer for Hispanic Latin America. He joined the Company
      in
      1990 as a trainee and has held various positions in the Distribution, Commercial
      and Direct Distribution Departments, including in Argentina and the Dominican
      Republic, where he was responsible for sales from 2004 to 2006. He has a degree
      in production engineering from *Universidade
      Federal do Rio de Janeiro* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Bernardo
      Pinto Paiva.** Mr.
      Paiva is AmBev’s Sales Executive Officer. He joined Brahma as a trainee in 1991
      and has held various positions in the Financial, Marketing and Sales
      departments. He was Regional Officer in Rio de Janeiro and Logistics and Supply
      Executive Officer. He has a degree in production engineering from *Universidade
      Federal do Rio de Janeiro* .
      He also
      holds a post-graduate degree in marketing from *Pontifícia
      Universidade Católica do Rio de Janeiro* and an
      executive graduate diploma from London Business School. His principal business
      address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo,
      Brazil.




**Carlos
      Eduardo Klützenschell Lisboa.** Mr.
      Lisboa is AmBev’s Marketing Executive Officer. He joined the Company in 1993 and
      has held the positions of Regional Marketing Manager, Domestic Operating Manager
      and *Skol* ’s
      Marketing Manager. He has a degree in business administration and a postgraduate
      degree in marketing from *Universidade
      Católica de Pernambuco* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Cláudio
      Braz Ferro.** Mr.
      Ferro is the Industrial Executive Officer of AmBev. He joined Brahma in 1977
      as
      a Brew Master and was responsible for the production and bottling divisions.
      In
      1984, he was appointed Manager of the Industrial Department and, in 1990,
      Manager of the Rio de Janeiro plant. He holds a degree in industrial chemistry
      from *Universidade
      Federal de Santa Maria* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Francisco
      de Sá Neto.** Mr. Sá
Neto is AmBev’s Carbonated Soft Drinks Executive Officer. He joined the Company
      in 1998 and has held various positions in the areas of Sales and Direct
      Distribution. He was also the Regional Officer in Southern Brazil. He has a
      degree in civil engineering from *Universidade
      Federal da Bahia* and
      holds an MBA from University of California, Berkeley. His principal business
      address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo,
      Brazil.




**Milton
      Seligman.** Mr.
      Seligman is AmBev’s Corporate Issues Executive Officer. He joined the Company in
      2001 and has held the positions of Governmental Relations Officer and
      Communication Officer. Mr. Seligman served, among others, as Chairman and member
      of the BNDES, as well as Minister of Development, Industry and Foreign Trade
      (Interim Substitute Minister) from 1999 to 2000. He has a degree in electrical
      engineering from *Universidade
      Federal de Santa Maria* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Pedro
      de Abreu Mariani.** Mr.
      Mariani is the General Counsel of AmBev. He joined the Company in 2004. He
      holds
      a law degree from *Pontifícia
      Universidade Católica do Rio de Janeiro* and a
      LL.M. from the London School of Economics and Political Science. His principal
      business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo,
      Brazil.




**Compensation**




The
      aggregate remuneration of all members of the Board of Directors and Executive
      Officers of AmBev in 2005 for services in all capacities amounted R$23.2
      million, including variable compensation (bonuses). In addition, the members
      of
      the Board of Directors and Executive Officers are entitled to fringebenefits,
      provided to all AmBev employees and covered dependents, such as medical
      assistance, tuition allowances and some supplementary social security benefits.
      Most of  such benefits are provided by or through FAHZ. The Board of
      Directors and Executive Officers are also elegible for the stock ownership
      plan.
      For further information, see “Directors, Senior Management and Employees - Stock
      Ownership Plan”.




73




On
      various dates in 2005, pursuant to the terms and conditions of the stock
      ownership plans still in place, we have acquired from the Directors and Officers
      a total of 4.1 million common shares (R$2.7 million) and 193.2 million (R$152.0
      million) preferred shares. Such amounts were calculated and paid taking into
      consideration the average market price of the day of the closing of the
      transaction or specific rules of the stock ownership plans (e.g. cases of
      resignation, etc.).




**Board
      Practices**




In
      2005, we held numerous meetings with investors and analysts. We also
      participated in conferences and road shows in Brazil, the United States and
      Europe. We hosted quarterly conference calls, transmitted simultaneously on
      the
      Internet, to clarify financial and operating results as well as answer questions
      from the investment community. We also organized site visits for investors
      and
      analysts.




***Fiscal
      Committee (Conselho Fiscal)***




At
      AmBev’s Annual and Extraordinary Shareholders’ Meeting held on April 12, 2005,
      we approved an amendment of our by-laws to make the *Conselho
      Fiscal* a
      permanent body. The following members were appointed to the *Conselho
      Fiscal* at
      AmBev’s General Ordinary and Extraordinary Meeting held on April 20, 2006, for a
      term expiring upon the Ordinary Annual Shareholders’ Meeting of 2007: Alcides
      Lopes Tápias, Álvaro Antônio Cardoso de Souza and Aloisio Macário Ferreira de
      Souza, and, as alternates, respectively, Ary Waddington, Emmanuel Sotelino
      Schifferle and Nilson José Bulgueroni. All of them are “independent” members as
      per Rule 10A-3(c)(v) of the Sarbanes-Oxley Act of 2002.




The
      responsibilities of the *Conselho
      Fiscal* include
      supervision of management, performing analyses and rendering opinions regarding
      AmBev’s financial statements and performing other duties in accordance with
      Brazilian Corporate Law. None of the members of the *Conselho
      Fiscal* is also
      a member of the Board of Directors or of any Committee thereof.




In
      addition, we have relied on the exemption provided for under Rule 10A-3(c)
      of
      the Sarbanes-Oxley Act of 2002, which enables us to have the *Conselho
      Fiscal* performing duties of an audit committee for the purposes of such Act, to the
      extent permitted by Brazilian law. We do not believe that reliance on this
      exemption would materially adversely affect the ability of our *Conselho
      Fiscal* to act
      independently and to satisfy the other requirements of such Act.




***The
      Board of Directors***




Most
      of the Board members have been in office for years, having the current members
      mandate until 2008. The Board members use their extensive knowledge of the
      business to ensure that AmBev reaches its long-term goals and maintains its
      short-term competitiveness. Moreover, the Board of Directors ensures that AmBev
      pursues its short-term business goals without compromising the Company’s
      long-term growth, while at the same time ensuring that AmBev’s corporate values
      are practiced.




74




The
      Company’s Co-Chairmen of the Board of Directors and the Chief Executive Officers
      are separate positions held by different people. The Board of Directors is
      supported in its decision-making by the following committees:




***Executive
      Committee***




The
      Executive Committee is the main link between the policies and decisions made
      by
      the Board of Directors and AmBev’s management team. The Executive Committee’s
      explicit responsibilities are:




·
            to
                present medium and long-term planning proposals to the Board of
                Directors;·
            to
                propose and monitor AmBev’s annual performance targets and the budgets
                needed to attain the projected goals;·
            to
                monitor the Company’s standing through analysis of its results, market
                developments and permanent internal and external
                benchmarking;·
            to
                analyze and propose uniform best practice rules;·
            to
                monitor the performance of the Company’s trademarks and innovation
                strategies; and·
            to
                opine in matters involving recruiting programs, variable compensation
                and
                the spreading of the Company’s
                culture.




Current
      members of the committee are Messrs. Victório Carlos De Marchi (Chairman),
      Marcel Herrmann Telles, Carlos Alberto da Veiga Sicupira and Luis Felipe
      Pedreira Dutra Leite. Throughout the year, the Executive Committee holds at
      least six meetings.




***Compliance
      Committee***




The
      Compliance Committee’s responsibilities are to assist the Board of Directors in
      the following matters:




·
            related
                party transactions;·
            any
                general conflict of interest situations;·
            compliance,
                by the Company, with legal, regulatory and statutory provisions concerning
                related party transactions;·
            monitoring
                and analysis of the internal controls of the Company;·
            monitoring
                and analysis of the fiscal profile of the Company; and·
            other
                matters the Board of Directors may consider relevant and in the interest
                of the Company.




Current
      members of the Compliance Committee are Messrs. Victório Carlos De Marchi
      (Chairman), José Heitor Attílio Gracioso, Carlos Alves de Brito, Vicente Falconi
      Campos and Luis Felipe Pedreira Dutra Leite. Throughout the year, the Compliance
      Committee holds at least four meetings.




***Finance
      Committee***




The
      Finance Committee’s purpose is to assist the Board of Directors on the following
      matters:




·
            to
                analyze and monitor the Company’s annual investment
                plan;·
            to
                analyze and monitor growth opportunities;·
            to
                analyze and monitor the Company’s capital structure and cash flow;
                and·
            to
                analyze and monitor the management of the Company’s financial risk, as
                well as budgetary and treasury
                policy.




75




Current
      members of the Finance Committee are Messrs. Luis Felipe Pedreira Dutra Leite
      (President), Marcel Herrmann Telles, Victório Carlos de Marchi, Carlos Alberto
      da Veiga Sicupira and Roberto Moses Thompson Motta.




Throughout
      the year, the Finance Committee holds at least four meetings, in which are
      discussed, among other matters: budget; financial risk analysis; treasury policy
      and merger and acquisition opportunities.




***Consulting
      Committee***




The
      Consulting Committee was formed in 2003 and is composed of three independent
      members appointed by the Board of Directors for terms of three years. The
      Consulting Committee has the following functions:




·
            to
                opine at the General Shareholders’ meetings and the Board of Directors,
                with respect to acts of the directors and officers and the fulfillment
                of
                their duties, pursuant to the law and the by-laws, as well as regarding
                the annual report and any propositions to be submitted to the
                shareholders;·
            to
                provide economic, industry and commercial data to the Board of Directors
                related to the Company’s main business purposes, including opinions and
                recommendations; and·
            to
                make recommendations concerning new business and general issues submitted
                to their consultation.




The
      mandate of the members of the Consulting Committee expired on June 11,
      2006.




**Employees**




As
      of December 31, 2005, AmBev and its subsidiaries (except Quinsa and its
      subsidiaries) had approximately 28,567 employees, approximately 50% of whom
      were
      engaged in production, 35% of whom were engaged in sales and distribution and
      15% of whom were engaged in administration.




The
      following table sets forth the number of employees of AmBev and its subsidiaries
      (except Quinsa and its subsidiaries) as of the end of the years
      indicated:




**Employees
                as of December 31,****(1)********2005**
            
            **2004**
            
            **2003**28,567
            
            25,974
            
            18,890




The
      following table shows the geographical distribution of AmBev’s employees as of
      April 30, 2006:




**Geographical
                Distribution of AmBev Employees****(1)****Location**
            
            **Number
                of Employees**Brazil
            
            
            19,350Canada
            
            
            4,165Dominican
                Republic
            
            
            1,977Venezuela
            
            
            1,065Peru
            
            
            1,274Ecuador
            
            
            327Guatemala
            
            
            223**Total**
            
            
            28,381







(1)Not including Quinsa and its
                subsidiaries.




76




***Training***




In
      1995, Brahma created the Brahma University (now “AmBev University”) to train and
      enhance our employees’ performance, and the performance of our distributors’
employees. In 2005, the AmBev University provided specific training for more
      than 3,100 employees and distributors, totaling 10,200 hours of training. At
      the
      management level, AmBev’s senior management and executive officers participate
      in several business and technical training programs at leading United States
      and
      European universities. Training programs in association with SENAI (National
      Service of Industrial Learning) held in our major facilities provide courses,
      mainly technical in nature, for supervisory and operating personnel. Together
      with Sindicerv, the Brazilian beer producers’ association, AmBev also has
      established a training school in the city of Vassouras, near Rio de Janeiro,
      which includes a micro brewery, bottling line and malting plant. AmBev also
      maintains a partnership with SIEBEL Institute in Chicago and with Dömens
      Academie in Munich, Germany, where its personnel responsible for beer production
      are introduced to new worldwide technologies and are able to visit other brewers
      and equipment suppliers.




AmBev
      maintains an e-learning program for on-the-job training for sales staff from
      the
      supervisory level. AmBev also operates AmBev TV, a proprietary distance-learning
      tool operated over a secure satellite broadcasting system that connects all
      of
      AmBev’s business units and a majority of our third-party distributors. In 2005,
      we provided standardized effective training to nearly 13,000 sales people.
      AmBev
      believes that its personnel are well trained and kept abreast of current
      technical and business developments.




***Industrial
      Relations***




All
      of AmBev’s employees in Brazil are represented by labor unions, but only
      approximately 7% of its employees in Brazil are actually members of labor
      unions. The number of administrative and distribution employees who are members
      of labor unions is not significant. Salary negotiations are conducted annually
      between the workers’ unions and AmBev. Collective bargaining agreements are
      negotiated separately for each facility or distribution center. AmBev’s
      collective bargaining agreements have a term of one year, and AmBev usually
      enters into new collective bargaining agreements on or prior to the expiration
      of the existing agreements. AmBev believes that its relation with its employees
      is satisfactory, and there have been no strikes or significant labor disputes
      in
      the past ten years.




Approximately
      60% of our employees in our North America operations are represented by unions.
      Unionized employees are usually employees working within the production or
      distribution departments of the company, except for our operations in Quebec,
      which is approximately 85% unionized with both sales and office administration
      employees belonging to unions. The company has been working together with its
      unions to obtain operating flexibility in exchange for improved wages and
      benefits. However, in the past years there have been disputes in some of our
      locations, which curtailed our activities in such places. For example, in 2002,
      in London (Canada), we experienced a four-month lockout. Similarly, in 2003
      we
      were subject to a three-month strike at our Montreal unit. Recently, at St.
      Johns, we also had a strike that lasted for three weeks.




***Health
      and Severance Benefits***




In
      addition to wages, AmBev’s employees receive additional benefits from AmBev.
      Some of these benefits are mandatory under Brazilian law, some are provided
      for
      in collective bargaining agreements, and others are voluntarily given by AmBev.
      The benefits packages of AmBev’s employees in Brazil consist of benefits
      provided both by AmBev directly and by AmBev through FAHZ, which provides
      medical, dental, educational and social assistance to current and retired
      employees of AmBev and their beneficiaries and covered dependents, either for
      free or at a reduced cost. AmBev may voluntarily contribute up to 10% of its
      consolidated net income, as determined in accordance with Brazilian Corporate
      law and AmBev’s bylaws, to support FAHZ.




AmBev
      is required to contribute 8.5% of each Brazilian employee’s gross pay to an
      account maintained in the employee’s name in the Government Severance Indemnity
      Fund (“FGTS”). Under Brazilian law, AmBev is also required to pay termination
      benefits to Brazilian employees dismissed without just cause, equal to 50%
      of
      the accumulated contributions made by AmBev to the FGTS during the employee’s
      period of service.




77




We
      provide health and benefits in accordance with local law for our employees
      located in our HILA-ex and North American operations.




***Stock
      Ownership Plan***




AmBev
      has a stock ownership plan designed to attract and retain the services of
      qualified directors, executives and employees. As of December 31, 2005, the
      plan
      had outstanding and exercisable rights to acquire 438.1 million shares of AmBev.
      The stock ownership plan (the “Plan”) was amended at AmBev’s General Meeting
      held on April 20, 2006. The following description relates to the Plan as amended
      by such General Meeting. The Plan relates to preferred shares only and is
      administered by the Board of Directors, which periodically creates programs
      defining the terms and employees to be included.




Beneficiaries
      of each program issued under the Plan who apply 25% or 50% of their bonus in
      the
      purchase of preferred shares of the Company (the “Underlying Shares”) are
      entitled to 2.3 or 4.6 options per share acquired, respectively (the “Options”).
      The exercise price of the Underlying Shares and the Options is the closing
      price
      of the preferred shares of the Company on the last stock exchange day at BOVESPA
      before the attribution of the Underlying Shares to the beneficiary. The vesting
      of the Options is subject to the following conditions being met:




·
            The
                beneficiary shall hold the Underlying Shares for at least 5
                years;·
            The
                beneficiary shall have invested 50% of its bonus in preferred shares
                of
                AmBev (in addition to the Underlying Shares) and held such shares
                for at
                least 3 years; and·
            The
                Company shall meet some performance
                measures.




The
      right to exercise the Options is forfeited in certain circumstances, such as
      resignation or dismissal prior to the vesting of the Options (5 years). The
      Options expire if not exercised within 5 years from vesting (i.e., 10 years
      after the date of grant.)




For
      plans granted prior to 2003, the subscription price of the shares could be
      finaced by the Company, for a period normally not exceeding four years and
      at an
      interest rate of 8% per annum over a designated general price index. These
      loans
      are guaranteed by the shares which will be acquired under the Plan. Due to
      the
      enactment of Sarbanes-Oxley Act of 2002, we have ceased to grant such loans
      for
      any subsequent stock ownership plans. Nevertheless, advances granted prior
      to
      2003 to employees are grandfathered. At December 31, 2005 the outstanding
      balance of the advances to employees under U.S. GAAP amounted to R$ 114.9
      million and is classified as an asset under Brazilian GAAP and a deduction
      from
      shareholders’ equity under U.S. GAAP.




***AmBev
      Pension Plan***




AmBev’s
      pension plans are administered by the AmBev Pension Fund ( *Instituto
      AmBev de Previdencia Privada* - IAPP).
      The AmBev Pension Fund operates both a defined benefit pension plan (closed
      to
      new participants since May 1998) and a defined contribution plan, which
      supplements benefits that the Brazilian government social security system
      provides to our employees. The AmBev Pension Fund was established solely for
      the
      benefit of our employees and its assets are held independently. IAPP is managed
      by the IAPP Council Board or *Conselho
      Deliberativo* which
      has four members, three of which are appointed by AmBev and the IAPP Director
      Board or *Diretoria
      Executiva* which
      has three members, all of which are appointed by the IAPP Council Board. IAPP
      also has a Fiscal Council with three members, two of which are appointed by
      the
      IAPP Council Board.




The
      AmBev Pension Fund is available to both active and retired employees. Three
      months after joining us, employees may opt to join the defined contribution
      plan. Upon leaving (unless upon retirement) members are required to leave the
      AmBev Pension Fund. Members who joined after 1990 and request to leave will
      receive their contributions in a single inflation indexed
      installment.




As
      of December 31, 2005, we had 5,582 participants in our pension plans, 3,295
      participants in the defined benefit plan, including 2,376 retired participants,
      and 2,287 participants in the defined contribution plan, including 28 retired
      participants.




78




Prior
      to May 1998, when the defined contribution plan was launched, there was only
      a
      defined benefit plan. The defined benefit plan was closed to new participants
      as
      of that date. New employees of AmBev can only join the defined contribution
      plan. At the time of adoption of the defined contribution plan, active
      participants were given the option either to remain in the old plan, or transfer
      their accumulated benefits to the defined contribution plan. The defined
      contribution plan covers substantially all new employees.




Pension
      costs relating to the AmBev contributed to IAPP for the year ended December
      31,
      2005 were approximately R$ 4.8 million compared to R$ 3.9 million in 2004.




The
      plan assets are comprised principally of time deposits and equity securities
      (including 9,595,170 preferred shares and 1,919,034 common shares of AmBev
      with a total market value of R$ 10 million as of December 31, 2005), government
      securities and properties. All benefits are calculated and paid in inflation
      indexed *Reais* .




Labatt
      provides pension plan benefits in the defined contribution model and in the
      defined benefit model to its employees, as well as certain post-retirement
      benefits. Labatt Canada also provides certain post-retirement pension benefits
      to certain distributors.




As
      at December 31, 2005, AmBev had liabilities deriving from pension plan benefits
      obligations in the amount of R$ 2,841.3 million. See Note 23(a)(vii) to the
      Financial Statements.




***Profit-Sharing
      Plan***




Executive
      officers’ bonuses are determined based upon the achievement of corporate,
      department or business-unit and individual goals, established by the Board
      of
      Directors. All other employees of AmBev are entitled to performance-based
      variable bonuses calculated on an annual basis.




Among
      all employees, up to 60% can be awarded bonuses. The distribution of these
      bonuses is subject to a three-tier system in which AmBev must first achieve
      efficiency targets approved by the Board of Directors. Following that, each
      business unit must achieve its targets and finally individual performance is
      ranked.




Our
      annual targets may be changed by the Board of Directors. For employees involved
      in operations, we have a collective award for production sites and distribution
      centers with outstanding performances. The bonus award at the plant level is
      based on a ranking between the different plants, which based on their relative
      ranking may or may not receive the bonus.




Expenses
      of AmBev provisioned under these programs amounted to R$ 202.8 million for
      the
      year ended December 31, 2005, R$ 152.4 millions for the year ended December
      31,
      2004 and R$ 23.6 million for the year ended December 31, 2003.




Bonuses,
      commissions and collective awards to be shared among employees depend on the
      operating results of AmBev and performance reviews based on individual and
      collective targets.




79




**Share
      Ownership**




The
      following table shows the amount, type and percentage of class of our equity
      securities held by members of our Board of Directors and by senior management
      as
      of May 31, 2006:




**Name**
            
            **Amount
                and Percentage**
              **of
                Common Shares**
            
            **Amount
                and Percentage**
              **of
                Preferred Shares**Victório
                Carlos De Marchi(1)
            
            *
            
            *Carlos
                Alves de Brito
            
            *
            
            *Marcel
                Herrmann Telles(2)
            
            *
            
            *Carlos
                Alberto da Veiga Sicupira(3)
            
            *
            
            *José
                Heitor Attílio Gracioso(4)
            
            *
            
            *Roberto
                Herbster Gusmão(5)
            
            *
            
            *Vicente
                Falconi Campos
            
            *
            
            *Luis
                Felipe Pedreira Dutra Leite
            
            *
            
            *Johan
                M.J.J. Biesbroeck
            
            *
            
            *Jorge
                Paulo Lemann(6)
            
            *
            
            *Roberto
                Moses Thompson Motta
            
            *
            
            **
            
            *Luiz
                Fernando Ziegler de Saint Edmond
            
            *
            
            *Miguel
                Nuno da Mata Patricio
            
            *
            
            *Joáo
                Mauricio Giffoni de Castro Neves
            
            *
            
            *Bernardo
                Pinto Paiva
            
            *
            
            *Carlos
                Eduardo Klützenschell Lisboa
            
            *
            
            *Cláudio
                Braz Ferro
            
            *
            
            *Francisco
                de Sá Neto
            
            *
            
            *Milton
                Seligman
            
            *
            
            *Pedro
                de Abreu Mariani
            
            *
            
            *Jorge
                Luiz Gualberti da Rocha
            
            *
            
            *







*
            Indicates
                that the individual holds less than 1% of the class of
                securities.(1)
            Mr.
                De Marchi is a trustee of FAHZ. For information regarding the shareholding
                of FAHZ, see “Major Shareholders and Related Party Transactions—AmBev’s
                Major Shareholders”.(2)
            Does
                not include shares owned by InBev. Mr. Telles is part of the controlling
                group of InBev, and is also an intervening party to the AmBev
                Shareholders’ Agreement. See “Major Shareholders and Related Party
                Transactions—Major Shareholders—AmBev Shareholders’ Agreement”. Mr. Telles
                is also a trustee of FAHZ. For information regarding the shareholdings
                of
                FAHZ, see “Major Shareholders and Related Party Transactions— Major
                Shareholders—AmBev’s Major Shareholders”.(3)
            Does
                not include shares owned by InBev. Mr. Sicupira is part of the controlling
                group of InBev, and is also an intervening party to the AmBev
                Shareholders’ Agreement. See “Major Shareholders and Related Party
                Transactions—Major Shareholders—AmBev Shareholders’
                Agreement”.(4)
            Mr.
                Gracioso is a trustee of FAHZ. For information regarding the shareholding
                of FAHZ, see “Major Shareholders and Related Party Transactions— Major
                Shareholders—AmBev’s Major Shareholders”.(5)
            Mr.
                Gusmão is a trustee of FAHZ. For information regarding the shareholding
                of
                FAHZ, see “Major Shareholders and Related Party Transactions— Major
                Shareholders—AmBev’s Major Shareholders”.(6)
            Does
                not include shares owned by InBev. Mr. Lemann is part of the controlling
                group of InBev, and is also an intervening party to the AmBev
                Shareholders’ Agreement. See “Major Shareholders and Related Party
                Transactions—Major Shareholders—AmBev Shareholders’
                Agreement”.




80






**DIFFERENCES
      BETWEEN THE UNITED STATES AND THE BRAZILIAN CORPORATE**


**GOVERNANCE
      PRACTICES**




The
      SEC approved in November 2003 the new corporate governance rules established
      by
      the NYSE. According to these rules, foreign private issuers that are listed
      on
      the NYSE must disclose the significant ways in which their corporate governance
      practices differ from the corporate governance standards established by the
      NYSE.




In
      Brazil, the CVM has provided guidance to the market with a set of
      recommendations on differentiated corporate governance practices which are
      not
      yet required but strongly recommended. Additionally, the Bovespa and the
      IBGC-Brazilian Institute of Corporate Governance have developed guidelines
      to
      help with the dissemination of corporate governance practices.




The
      principal differences between the NYSE corporate governance standards and our
      corporate governance practices are as follows:




**INDEPENDENCE
      OF DIRECTORS AND INDEPENDENCE TESTS**




NYSE
      corporate governance standards require listed companies to have a majority
      of
      independent directors and set forth the principles by which a listed company
      can
      determine whether a director is independent. “Controlled companies” such as
      AmBev need not comply with this requirement.




The
      Brazilian Corporate Law and our bylaws require that our directors be elected
      by
      our shareholders at a general shareholders meeting. Currently, all of our
      directors are appointed by our controlling shareholders; minority shareholders
      are represented through one seat in our *Conselho
      Fiscal* .




The
      Brazilian Corporate Law and the CVM establish rules in relation to certain
      qualification requirements and restrictions, investiture, compensation, duties
      and responsibilities of a company’s executives and directors.




**EXECUTIVE
      SESSIONS**




NYSE
      corporate governance standards require non-management directors of a listed
      company to meet at regularly scheduled executive sessions without
      management.




According
      to the Brazilian Corporate Law, up to one-third of the members of the Board
      of
      Directors can also hold management positions. However, none of our directors
      holds a management position at this time and, accordingly, we believe we would
      be in compliance with this NYSE corporate governance standard.




**NOMINATING/CORPORATE
      GOVERNANCE AND COMPENSATION COMMITTEES**




NYSE
      corporate governance standards require that a listed company have a
      nominating/corporate governance committee and a compensation committee each
      composed entirely of independent directors with a written charter that addresses
      certain duties. “Controlled companies” such as AmBev need not comply with this
      requirement.




In
      addition, we are not required under Brazilian law to have, and accordingly
      we do
      not have, a nominating committee, corporate governance committee or compensation
      committee. Currently, all of our directors are nominated by our controlling
      shareholders. The role of the corporate governance committee is generally
      performed by either our Board of Directors or our senior management. With
      respect to compensation, under Brazilian Corporate Law, the shareholders
      determine the total or individual compensation of a company’s directors and
      executive officers, including benefits and allowances at a general shareholder’s
      meeting.




**AUDIT
      COMMITTEE AND AUDIT COMMITTEE ADDITIONAL REQUIREMENTS**




NYSE
      corporate governance standards require that a listed company have an audit
      committee composed of three independent members that satisfy the independence
      requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”), with a written charter that addresses certain
      duties.




81




The
      Brazilian Corporate Law requires us to have a non-permanent *Conselho
      Fiscal* .
      The *Conselho
      Fiscal* operates
      independently from our management and from our registered independent public
      accounting firm. Its principal function is to examine the financial statements
      of each fiscal year and provide a formal report to our shareholders. We maintain
      a permanent *Conselho
      Fiscal* .
      We are
      relying on the exemption provided by Rule 10A-3(c)(3) and believe that our
      reliance on this exemption will not materially affect the ability of the *Conselho
      Fiscal* to act
      independently and to satisfy the other requirements of Rule 10A-3.




**SHAREHOLDER
      APPROVAL OF EQUITY COMPENSATION PLANS**




NYSE
      corporate governance standards require that shareholders of a listed company
      must be given the opportunity to vote on all equity compensation plans and
      material revisions thereto, subject to certain exceptions.




Our
      existing stock option plan was amended and restated by the General Shareholders
      Meeting held on April 20, 2006. Pursuant to such plan, our Board of Directors
      is
      responsible for voting on the issuance of new equity in connection with stock
      option programs issued under the existing stock option plan, provided that
      the
      limit of our authorized capital is respected. Any issuance of new shares that
      exceeds such authorized capital is subject to shareholder approval.




**CORPORATE
      GOVERNANCE GUIDELINES**




NYSE
      corporate governance standards require that a listed company must adopt and
      disclose corporate governance guidelines that address certain minimum specified
      standards which include, director qualification standards, director
      responsibilities, director access to management and independent advisors,
      director compensation, director orientation and continuing education, management
      succession, annual performance evaluation of the board.




We
      believe the corporate governance guidelines applicable to us under Brazilian
      Corporate Law are consistent with the guidelines established by the NYSE. We
      have adopted and observe our Manual on Disclosure and use of Information and
      policies for Trading with Securities issued by AmBev which deals with the public
      disclosure of all relevant information as per CVM’s guidelines, as well as with
      rules relating to transactions involving the dealing by our management and
      controlling shareholders in our securities.




We
      periodically update our investor relations website. We also host quarterly
      conference calls with investors which are broadcasted live through the internet.




**CODE
      OF BUSINESS CONDUCT**




NYSE
      corporate governance standards require that a listed company must adopt and
      disclose a code of business conduct and ethics for directors, officers and
      employees and promptly disclose any waivers of the code for directors or
      officers.




We
      have adopted a Code of Business Conduct that applies to all officers and
      employees. There are no waivers to our Code of Business Conduct.




**CERTIFICATION
      REQUIREMENTS**




NYSE
      corporate governance standards require that each listed company’s Chief
      Executive Officer certify to the NYSE each year that he or she is not aware
      of
      any violation by the company of the NYSE corporate governance
      standards.




As
      required by Section 303A.12(b) of the NYSE corporate governance standards,
      our
      Chief Executive Officers will promptly notify the NYSE in writing after any
      of
      our executive officers becomes aware of any material non-compliance with any
      applicable provisions of the NYSE corporate governance standards.




82




**Major
      Shareholders and Related Party Transactions**




**MAJOR
      SHAREHOLDERS**




**Introduction**




As
      of May 31, 2006, AmBev had 34,508,111,051 common voting shares and
      31,384,324,044 preferred non-voting shares outstanding. AmBev has registered
      two
      classes of American Depositary Shares (“ADSs”) pursuant to the Securities Act:
      ADSs evidenced by American Depositary Receipts (“ADRs”) representing 100
      preferred shares, and ADSs evidenced by ADRs representing 100 common shares.
      As
      of May 31, 2006, there were 68,532,164 preferred ADSs outstanding (representing
      6,853,216,400 preferred shares) and 7,160,871 common ADSs outstanding
      (representing 716,087,100 common shares). AmBev ADRs are issuable by The Bank
      of
      New York pursuant to deposit agreements for common and preferred shares.




**Control**




AmBev
      is controlled by InBev and FAHZ, which own in the aggregate 88.4% of AmBev’s
      outstanding common shares. In addition, InBev (through Interbrew International
      B.V. and Ambrew S.A.) and FAHZ, as well as Marcel Telles, Jorge Paulo Lemann
      and
      Carlos Sicupira, as intervening parties, are parties to a shareholders’
agreement relating to AmBev. See “—AmBev Shareholders’ Agreement”. As of May 31,
      2006, FAHZ owns 15.5% of the outstanding common shares of AmBev. InBev
      collectively own 72.9% of the outstanding common shares of AmBev.




**Share
      Buyback Programs**




In
      2005, we acquired 547.7 million preferred shares in connection with our share
      buyback program, at a cost of R$ 487.2 million. In 2004, we acquired 2,605.0
      million preferred shares in connection with our share buyback program, at a
      cost
      of R$ 1,609.6 million. In 2003, we acquired 63.5 million common shares and
      529.3
      million preferred shares in connection with our share buyback program, at a
      cost
      of R$ 310.0 million.




In
      2005, our Board of Directors launched a program for the purchase of our
      outstanding preferred shares, valid for a period of 365 days from the date
      it
      was approved. In February 2006, another plan was launched for the purchase
      of
      983.9 million of our outstanding preferred shares and of 378.1 million of our
      outstanding common shares, valid for a period of 180 days. In August 2006,
      another plan was launched for the purchase of 669.7 million of our outstanding
      preferred shares and of 370.4 million of our outstanding common shares, in
      an
      aggregated amount up to R$ 1.0 billion, valid for a period of 360 days. In
      accordance with CVM rules, share buyback programs may be conducted through
      the
      issuance of put and call options (provided that the volume of such options
      issued multiplied by their respective strike prices does not exceed the limit
      established for the plan), and the amount of shares to be kept in treasury
      may
      not exceed the equivalent to 10% of the free float of each class of
      shares.




83





The
      following table summarizes the share buyback programs approved by our Board
      of
      Directors in 2005 and 2006: :




**Approval
                Date**
            
            **Shares****Repurchased**
            
            
            
            **Amount
                Repurchased**
            
            **Date
                program**
              **was
                finalized****As
                a number**
            
            **As
                a % of free float****(1)**
            
            ***(R$
                in thousands****)*November
                7, 2005
            
            
            (preferred)
            
            
            547,694,270
            
            
            8.41
            
            
            487,176
            
            
            February
                7, 2006February
                22, 2006
            
            
            (preferred)
            
            
            416,118,966
            
            
            5.41
            
            
            373,008
            
            
            August
                7, 2006(common)
            
            
            21,371,944
            
            
            9.72
            
            
            17,095August
                7, 2006
            
            
            (preferred)
            
            
            -
            
            
            9.74
            
            
            -
            
            
            Not
                Finalized(common)
            
            
            -
            
            
            3.79
            
            
            -
            
            
            Not
                Finalized**Total**
            
            
            
            
            
            **985,140,180**
            
            
            **N/A**
            
            
            **877,279**
            
            
            **N/A**




(1) Total number of shares that may be purchased as a percentage of free-float
      referred to the plan announcement date.




**AmBev’s
      Major Shareholders**




The
      following table sets forth information as of May 31, 2006 with respect to any
      person known to AmBev to be the beneficial owner of 5% or more of AmBev’s
      outstanding shares:




**Amount
                and Percentage**
              **of
                Common Shares**
            
            **Amount
                and Percentage**
              **of
                Preferred Shares**The
                Bank of New York - ADR Department(1)
            
            
            716,087,100
            
            
            2.08
            %
            
            6,853,216,400
            
            
            21.84
            %Interbrew
                International B.V.
            
            
            22,287,945,223
            
            
            64.59
            %
            
            10,094,010,369
            
            
            32.16
            %AmBrew
                S.A.
            
            
            2,871,670,430
            
            
            8.32
            %
            
            1,436,511,984
            
            
            4.57
            %FAHZ(2)
            
            
            5,349,312,173
            
            
            15.50
            %
            
            103,202,513
            
            
            0.33
            %Caixa
                da Previdência dos Funcionários do Banco Central do Brasil -
                PREVI
            
            
            664,631,371
            
            
            1.93
            %
            
            3,016,656,855
            
            
            9.93
            %





(1)
            Represents
                the number of shares held in the form of ADSs. The Bank of New York
                is the
                depositary of AmBev shares in accordance with the deposit agreement
                entered into with AmBev and the owners of AmBev ADSs.




(2)
            Messrs.
                Telles, Lemann, De Marchi, Gracioso and Gusmão, directors of AmBev, are
                also counselors of FAHZ.




For
      a
      description of the Company’s major shareholders’ voting rights, see “—AmBev
      Shareholders Agreement”.





84




**Options
      and Warrants**




We
      are defendants in a number of lawsuits filed by 11 holders of warrants issued
      by
      AmBev challenging the criteria used by the Company in determining the strike
      price of such securities. In the event the plaintiffs prevail, in all of the
      above proceedings, we believe that the corresponding dilution for the existing
      shareholders would be the difference between the strike price deemed correct
      by
      the plaintiffs and the net book value of such shares at the time they are
      issued, multiplied by the number of shares involved. The Company has estimated
      that the aggregate subscription price of all relevant shares (in the event
      it
      prevails in such proceedings) should be R$ 1,022.4 million, representing
      26,602,450 common shares and 1,093,920,115 preferred shares. See “Legal
      Proceedings **—** Option
      and Warrants.”




**AmBev
      Shareholders’ Agreement**




InBev
      (through AmBrew S.A. and InterBrew International B.V.), FAHZ, as well as AmBev
      and Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, the latter
      four as intervening parties, entered into a shareholders’ agreement (the “AmBev
      Shareholders’ Agreement”) with respect to the voting of the shares of AmBev and
      the voting by AmBev of the shares of its subsidiaries, among other
      matters.




The
      AmBev Shareholders’ Agreement was originally signed in July 1, 1999 and amended
      on March 2, 2004.




The
      following discussion relates to the AmBev Shareholders’ Agreement, as modified
      by the first amendment.




***Management
      of AmBev***




Although
      each common share of AmBev entitles shareholders to one vote in connection
      with
      the election of AmBev’s Board of Directors, AmBev’s controlling shareholders,
      FAHZ, AmBrew S.A. and Interbrew International B.V., have the ability to elect
      the majority of AmBev’s directors. Because the election of any director by
      minority (non-controlling) shareholders would require, under Law 6,404/76,
      at
      the time of execution of the AmBev Shareholders’ Agreement, the adoption of a
      cumulative vote procedure, the provisions of the AmBev Shareholders’ Agreement
      on the management of AmBev were based on the assumption that no directors will
      be elected by minority shareholders of AmBev.




Due
      to the changes introduced by Law No. 10,303/01, minority shareholders holding
      at
      least 15% of voting capital and preferred shareholders (whose shares are not
      entitled to vote or are entitled to a restricted voting right) holding at least
      10% of AmBev’s total capital may each elect one member of the Board of Directors
      and its alternate member. Additionally, if neither the minority shareholders
      nor
      the preferred shareholders (whose shares are not entitled to vote or are
      entitled to a restricted voting right) achieve such percentages as mentioned
      above, they can jointly appoint one member of the Board of Directors and its
      alternate member once they represent, together, at least 10% of AmBev’s total
      capital. In order to exercise these rights, any of these shareholders must
      prove
      that it has uninterruptedly held the corresponding shares for at least three
      months prior to the shareholders’ meeting, where the election of the Board of
      Directors shall take place.




If
      such prerogative is exercised collectively with the adoption of a cumulative
      voting procedure, the controlling shareholders are entitled to elect the same
      number of members plus one, independently of the number of directors.




Presently,
      under the AmBev Shareholders’ Agreement, as amended, each of FAHZ, AmBrew S.A.
      and Interbrew International B.V. will have representation on the Board of
      Directors of AmBev and its subsidiaries and, in addition to the members and
      respective alternates they are entitled to appoint, each of FAHZ, on the one
      hand, and AmBrew S.A. and Interbrew International B.V., on the other hand,
      may
      appoint up to two observers to attend AmBev’s board meetings, without voting
      rights. The boards of directors of AmBev and its subsidiaries will each be
      comprised of at least three and no more than 15 regular members and the same
      number of alternates, with a term of office of three years and reelection being
      permitted. FAHZ will have the right to appoint four directors and their
      respective alternates to the boards of directors of AmBev and its subsidiaries,
      so long as it maintains ownership of common shares that FAHZ held as of July
      1,
      1999, when the AmBev Shareholders’ Agreement was entered into (adjusted for
      share dividends, splits and stock grouping).




85




At
      that
      time FAHZ held 459,521,728 common shares, which was adjusted for the
      five-for-one stock split that took effect on October 23, 2000 and for the share
      dividend that took effect on May 31, 2005. FAHZ appointed three of our
      directors. FAHZ is not allowed under the AmBev Shareholders’ Agreement to
      appoint more than four directors in the event that its holding of AmBev common
      shares increases. FAHZ will always be entitled to appoint at least one director
      as long as it holds a minimum of 10% of AmBev’s voting shares. AmBrew S.A. and
      Interbrew International B.V. have the right to appoint members and its
      alternates to the boards of directors of AmBev and its subsidiaries, in a number
      proportionate to the number of members appointed by FAHZ. Such proportion is
      based on the ratio between FAHZ’s holding and the joint holding of AmBrew S.A.
      and Interbrew International B.V. in the voting capital of AmBev.




The
      AmBev Shareholders’ Agreement provides that AmBev will have two Co-Chairmen with
      identical rights and duties, one appointed by FAHZ and the other jointly by
      AmBrew S.A. and Interbrew International B.V. In the event of a deadlock, neither
      of the Co-Chairmen has a deciding vote on matters submitted to the Board of
      Directors of AmBev.




Each
      of FAHZ, AmBrew S.A. and Interbrew International B.V., may remove a director
      that it has appointed to the Board of Directors of AmBev or its subsidiaries,
      and each also has the right to appoint the respective replacement or a new
      alternate, if the originally appointed alternate is confirmed for the vacant
      position.




Each
      of FAHZ, AmBrew S.A. and Interbrew International B.V. has agreed to exercise
      its
      voting rights in the shareholders’ meetings of AmBev and its subsidiaries in
      such a way that it may elect the largest possible number of directors in each
      of
      AmBev and its subsidiaries. FAHZ, AmBrew S.A. and Interbrew International B.V.
      will agree on the method of casting their votes in order to accomplish this
      purpose in the event of the adoption of a cumulative vote procedure under
      Brazilian law, under which each common share is entitled to as many votes as
      there are directors to be elected.




The
      AmBev Shareholders’ Agreement establishes that the shareholders may, by
      consensus, establish committees within AmBev’s Board of Directors, with the
      purpose of looking into specific matters, which analyses require that their
      members have specific technical knowledge. The Compliance Committee, the
      Executive Committee and the Financial Committee have already been created.
      See
“Directors, Senior Management and Employees—Board Practices”.




***Preliminary
      Meetings and Exercise of Voting Right***




On
      matters submitted to a vote of the shareholders or their representatives in
      the
      Board of Directors of AmBev or its subsidiaries, FAHZ, AmBrew S.A. and Interbrew
      International B.V. have agreed to endeavor first to reach a consensus with
      respect to voting their common shares of each of AmBev and its subsidiaries,
      and
      have agreed on the manner to direct their representatives to vote on the matter
      being submitted. The AmBev Shareholders’ Agreement provides that the parties
      shall hold a preliminary meeting in advance of all meetings of shareholders
      or
      boards of directors of AmBev or of its subsidiaries, with the purpose of
      discussing and determining a consensus position to be taken by the parties
      in
      such meetings.




If
      the parties fail to reach a consensus with respect to a particular matter,
      the
      position to be adopted by all parties to the agreement will be determined by
      the
      group holding the greatest number of AmBev voting common shares, which currently
      is constituted of AmBrew S.A. and Interbrew International B.V. However, this
      rule does not apply in connection with the election of members of Board of
      Directors, as described above under “Management of AmBev”, and with respect to
      matters which require unanimous approval by FAHZ, AmBrew S.A. and Interbrew
      International B.V., as follows:




·
            any
                amendment to the bylaws of AmBev and/or any of its subsidiaries with
                the
                purpose of amending: (i) the corporate purposes, (ii) the term of
                duration, and/or (iii) the composition, powers and duties of the
                management bodies;·
            approval
                of the annual investment budget of AmBev and/or any of its subsidiaries
                when the amount of the investments exceed 8.7% of net sales of AmBev
                foreseen for the same fiscal year;




86





·
            designation,
                dismissal and substitution of the Chief Executive Officer of
                AmBev;·
            approval
                of or amendment to the remuneration policy for the Board of Directors
                and
                of the executive board of AmBev, as well as of its
                subsidiaries;·
            approval
                of stock ownership plans for the managers and employees of AmBev
                and/or
                its subsidiaries;·
            change
                in the dividend policy of AmBev and/or any of its
                subsidiaries;·
            increases
                in the capital of AmBev and/or any of its subsidiaries, with or without
                preemptive rights, through subscription, creation of a new class
                of
                shares, or changes in the characteristics of the existing shares,
                as well
                as decreases of capital, issuances of debentures (whether or not
                convertible into shares), warrants, and the creation of founders’ shares
                by AmBev and/or any of its subsidiaries except when such legal businesses
                are carried out between AmBev and its subsidiaries or between the
                subsidiaries;·
            amalgamations,
                spin-offs, transformations, mergers, acquisitions, and divestments
                involving AmBev and/or any of its subsidiaries, in the latter case
                (a)
                when such operation involves a company that is not a subsidiary,
                directly
                or indirectly, of AmBev and (b) provided that the transaction in
                question
                results in the reduction in the average dividend paid by AmBev in
                the past
                five years, adjusted by the IGP-M published by*Fundação
                Getúlio Vargas*as
                of the date of payment;·
            the
                creation, acquisition, assignment, transfer, establishment of an
                encumbrance on and/or disposal of shares, quotas and/or any securities
                issued by any of AmBev’s subsidiaries, under any title or form, except in
                the benefit of AmBev and/or another subsidiary;·
            the
                incurrence by AmBev and/or any of its subsidiaries of a debt transaction
                that results in a net debt/equity ratio greater than
                1.5;·
            the
                execution, amendment, termination, renewal or cancellation of any
                contracts, agreements or the like involving the registered or deposited
                trademarks of AmBev or its subsidiaries;·
            the
                extension of loans or the offer of guarantees of any kind by AmBev
                and/or
                any of its subsidiaries to any third parties in an amount greater
                than 1%
                of AmBev’s shareholders’ equity as set forth in the last audited balance
                sheet prepared in accordance with Brazilian GAAP, except in favor
                of
                employees of AmBev and its subsidiaries, or in favor of the subsidiaries
                themselves;·
            election
                of members of committees of AmBev’s Board of Directors;·
            cancellation
                of the registration of AmBev and/or any of its subsidiaries as publicly
                traded companies;·
            petition
                for an arrangement with creditors (“*concordata*”)
                or acknowledgment of bankruptcy by AmBev and/or any of its
                subsidiaries;·
            liquidation
                or dissolution of AmBev and/or any of its subsidiaries;
                and·
            appointment
                of the external auditors of AmBev and/or any of its
                subsidiaries.




The
      AmBev Shareholders’ Agreement provides that whenever the parties fail to reach a
      consensus in a preliminary meeting as to any matter listed above, they will
      exercise their voting rights so as not to approve such matter. The AmBev
      Shareholders’ Agreement provides that any votes cast by FAHZ, AmBrew S.A. and
      Interbrew International B.V., or by any of the board members appointed by each
      of them, in violation of the provisions of the agreement will be deemed null,
      void and ineffective.




87




***Transfer
        of Shares***
  The
        AmBev Shareholders’ Agreement contains the following provisions concerning the
        transfer of shares:
  ·
              FAHZ,
                  AmBrew S.A. and Interbrew International B.V. have agreed (i) not
                  to
                  dispose, directly or indirectly, of their shares, through private
                  trades,
                  on the stock market or on the over-the-counter market, including
                  by way of
                  tender offers, either voluntary or mandatory, except as provided
                  for in
                  Section VI of the AmBev Shareholders’ Agreement, during the term of the
                  agreement, and (ii) not to create any type of encumbrance on their
                  shares,
                  without the prior written consent of FAHZ, in the case of AmBrew
                  S.A. and
                  Interbrew International B.V., and without the prior written consent
                  of
                  AmBrew S.A. and Interbrew International B.V., in the case of 
                  FAHZ.·
              In
                  the event that the shares of AmBev owned by FAHZ, on the one hand,
                  and by
                  AmBrew S.A. and Interbrew International B.V., on the other hand,
                  become
                  subject to seizure, attachment, judicial surety or any other restrictive
                  measure, and such restriction is not removed or waived within 30
                  days
                  after its imposition, the shares subject to the restriction shall
                  be
                  automatically deemed offered for sale to the other party. This
                  offer will
                  remain open for 30 days, and the price for the AmBev shares will
                  be the
                  lesser of either (i) the book value of the AmBev shares, as per
                  the latest
                  audited balance sheet of AmBev, prepared in accordance with Brazilian
                  GAAP, and adjusted by the IGP-M inflation index or (ii) the average
                  quoted
                  market price of the AmBev shares on stock exchanges in the 20 days
                  prior
                  to the petition for removal or waiver of the restriction. If the
                  obligations in respect of such restriction exceed the above price,
                  the
                  party whose shares have been subject to the restriction will be
                  liable for
                  the difference that the other party may be required to deposit
                  in order to
                  acquire the shares. If the obligations in respect of such restriction
                  were
                  lower than the price for the AmBev shares as described above, then
                  the
                  party whose shares have been subject to the restriction will be
                  entitled
                  to receive the difference between the price for the AmBev shares
                  and the
                  obligations in respect of such restriction.·
              If
                  any of FAHZ, on the one hand, and AmBrew S.A. and Interbrew International
                  B.V., on the other hand, intends to dispose of subscription rights
                  relating to AmBev shares that it holds, it must first offer such
                  rights to
                  the other party, who will then be required to exercise its right
                  of first
                  refusal to subscribe the new shares to be issued, within 10
                  days.
  The
        Shareholders’ Agreement provides that any transfer of shares or subscription
        rights or creation of encumbrances in which the aforementioned provisions
        on
        rights of first refusal are not observed will be deemed null, void and
        ineffective. AmBev’s management is also prohibited from reflecting any such
        events in its corporate books, as permitted by Brazilian law.
  ***Specific
        Performance***
  Obligations
        of the parties under the AmBev Shareholders’ Agreement will be subject not only
        to specific performance but will also bind third parties to the terms of
        the
        agreement, in effect declaring null and void any action taken in contravention
        to it so long as rights and obligations of third parties stem from the
        agreement.
  **RELATED
        PARTY TRANSACTIONS**
  **Material
        Related Party Transactions**
  ***AmBev
        and Affiliated Entities***
  We
        engage in the purchase and sale of raw material with affiliated entities,
        which
        effects are eliminated on our consolidated financial statements, with the
        exception of entities under common control (which are proportionally
        consolidated), as described in Note 2(b) to our audited consolidated financial
        statements.
 
 88
  ***AmBev
        and the Fundação Antonio e Helena Zerrener Instituição Nacional de Beneficência
        (“FAHZ”*** ***)***
  *Medical,
        dental and social assistance*
  One
        of the activities of FAHZ, as described in its bylaws, is to “provide medical
        and dental assistance to employees and administrators (including dependants)
        of
        AmBev and its controlling companies.”
  *Purchase
        of labels from FAHZ*
  On
        April 24, 2002, CBB (of which AmBev is a successor, as a result of CBB having
        being merged into AmBev) and FAHZ executed an agreement for the
        industrialization of products (labels), using raw materials supplied by AmBev.
        The prices vary in accordance with the order, and are determined under arm’s
        length conditions.
  *Lease
        Agreements with FAHZ*
  On
        February 1 st ,
        2002,
        FAHZ and CBB (now AmBev) executed a Lease Agreement pursuant to which FAHZ
        leased to CBB the offices where AmBev’s headquarters are now located. The total
        amount of the lease in 2005 was approximately R$2.37 million. In addition,
        FAHZ
        leases the real estate comprising our distribution centers in Diadema and
        Salvador for an aggregate monthly amount of R$555,676.00.
  ***AmBev
        and Employees***
  Before
        January 1, 2003, AmBev had deferred payment stock option plans. See “Directors,
        Senior Management and Employees—Employees—Stock Ownership Plan”. Such a
        financing option, however, has been removed from the stock ownership plans
        approved subsequent to the enactment of the Sarbanes-Oxley Act. Nevertheless,
        deferred payment for the stock ownership plans granted prior to 2003 are
        grandfathered and may be requested. The current Stock Ownership Plan is the
        result of a revised text approved in AmBev’s Extraordinary General Meeting of
        April, 20, 2006, updating the plan approved on September 14, 2000.
  ***AmBev
        and Quinsa***
  We
        have entered into a variety of agreements with Quinsa and BAC, Quinsa’s
        controlling shareholder, relating to the acquisition of our interest in Quinsa.
        See “Information on the Company—History and Development of the Company—Interest
        in Quinsa”. On April, 13, 2006, AmBev and BAC executed an agreement pursuant to
        which BAC agreed to sell all its remaining shares in Quinsa to AmBev for
        a total
        purchase price of approximately US$1.2 billion, subject to certain adjustments,
        including dividends and interest. With the closing of the transaction, which
        took place on August 8, 2006, AmBev’s equity interest in Quinsa increased from
        56.72% to 91.18% of the latter’s total share capital. The adjusted purchase
        price paid to BAC was US$ 1,252,572,033. See “Information on the Company—History
        and Development of the Company—Interest in Quinsa”.
  ***InBev
        and Labatt Brewing Company Limited***
  On
        August 27, 2004, in connection with the consummation of the merger of Labatt
        into AmBev, Labatt Brewing Company Limited (“LBCL”) and InBev entered into a
        cross-services agreement with a view to:
  ·
              terminating
                  the then existing services agreement among those entities before
                  the
                  incorporation;·
              LBCL
                  providing to InBev, on an hourly basis, certain administrative
                  services
                  such as tax support services, internal audit services and legal
                  services,
                  until December 31, 2004 (extended until March 31, 2005 pursuant
                  to an
                  amendment to the cross-services agreement); and·
              InBev
                  providing to LBCL, on an hourly basis, administrative services
                  such as
                  internal audit services, legal advice and IT support, until December
                  31,
                  2004 (extended until March 31, 2005 pursuant to an amendment to
                  the
                  cross-services agreement).
  89
  ***InBev,
        AmBev and LBCL***
  *Intellectual
        Property and Hedge Agreements*
  On
        August 27, 2004, InBev, LBCL and AmBev agreed that (i) InBev would be entitled
        to all intellectual property created or developed by LBCL, and InBev would
        bear
        certain technology and patent development costs incurred by LBCL and certain
        of
        Labatt subsidiaries until December 31, 2004 (extended until March 31, 2005
        pursuant to an amendment to such agreement), (ii) LBCL would be entitled
        to
        continue using a subsidiary of InBev to assist it with hedge arrangements
        and
        (iii) InBev would be the sole owner of all intellectual property developed
        until
        that date, even after the end of the Agreement and, as such, LBCL shall pay
        to
        InBev a remuneration in respect of its use.
  *Brands*
  We
        distribute some of our brands in the United States, including *Labatt
        Blue* and *Kokanee* ,
        through
        InBev USA (previously Labatt USA, L.L.C.), a subsidiary of InBev, under a
        distribution agreement between InBev and Labatt.
  *Labatt
        Tax Reassessments*
  On
        March 7, 2005, due to a notice of reassessment in respect of LBCL’s 1998
        taxation year issued by the Canada Revenue Agency on December 2, 2004, and
        other
        notices that could be issued, and in view of the indemnification provisions
        set
        forth in the *Incorporação* Agreement,
        InBev, LBCL and AmBev agreed that LBCL should pay the relevant tax authorities
        the full amounts due under any such notices, and InBev would reimburse any
        such
        amounts, including increased interest expenses as a result of LBCL’s increased
        leverage ratios, on an annual basis or at each time that LBCL has a credit
        with
        InBev over U.S.$40 million. At December 31, 2005, the net payments of
        recoverable under this agreement from InBev is approximately CAD$21
        million.
  *Transfer
        Pricing*
  On
        August 27, 2004, InBev, AmBev and LBCL entered into agreements relating to
        the
        transfer prices and policy for all beer product transfers between InBev and
        the
        LCBL companies. The Companies confirm that the Interbrew Transfer Pricing
        Policy
        shall continue to be the transfer pricing policy in effect between the
        InBev  Companies and the LBCL Companies for beer product transfers between
        and among them, except as provided for in the Agreement. In addition, the
        Agreement confirms certain terms of the Exclusive Distributor Agreement which
        governs the transfer pricing principles for the transfer of beer and other
        products between LBCL and InBev USA.
  ***AmBev
        and InBev***
  On
        March 21, 2005, AmBev and InBev entered into a cross-license agreement through
        which AmBev is allowed to produce, package, market and distribute beer under
        the
        brands *Stella
        Artois* and *Beck’s* in Latin
        America (except Argentina and Cuba), on an exclusive basis, and InBev is
        allowed
        to produce, package, market and distribute beer under the brand *Brahma* in
        Europe, Asia, Africa, Cuba and the United States on an exclusive basis. AmBev
        has agreed not to directly or indirectly produce, package, market, distribute,
        sell or resell (or have an interest in any of these), directly or indirectly,
        any other European premium branded beer in Latin America, and InBev has agreed
        to be bound by the same restrictions relating to any other Latin American
        premium branded beer in Europe, Asia, Africa, Cuba and the United States.
        No
        royalties will be due in the first year, but royalties will be increased
        annually by 1.75% of net sales, up to 7%, thereafter. Since March 23, 2005,
        InBev has been distributing the *Brahma* brand in
        the United States and in a number of European countries such as the United
        Kingdom, France, the Benelux, Ukraine and Russia.  We announced the launch
        of the *Stella
        Artois* brand in
        Brazil on June 28, 2005. Labatt and InBev have an arrangement through which
        Labatt distributes *Stella Artois* branded
        beer in Canada. In addition, InBev distributes *Labatt Blue, Blue Light, Blue Dry, Labatt Canadian Ale and
        Kokanee* in the
        U.S. under a distribution agreement entered into with Labatt.
  On
        July 28, 2005, InBev Brasil was merged into AmBev pursuant to the terms and
        conditions of a merger protocol entered into between AmBev, InBev Brasil
        and
        InBev on July 7, 2005. Pursuant to the terms of the merger protocol, the
        capitalization by InBev of the tax benefit deriving from the amortization
        of the
        goodwill resulting from the merger will be limited to 70% of the corresponding
        capital reserve, with the remaining 30% being distributed to the shareholders
        of
        AmBev, to the extent dividends are available for distribution. Such amortization
        will be carried out within the next 10 years, in accordance with CVM Instruction
        319/99. The merger protocol also provides, among other matters, that InBev
        shall
        indemnify AmBev for any undisclosed liabilities of InBev Brasil.
  90
  ***InBev
        and AmBev with BT and IBM***
  On
        June 30, 2005, BT Limited, Belgian Branch and InBev entered into a Global
        Services Agreement for the provision, by BT, to certain affiliates of InBev,
        including AmBev, of telecommunication services for the IT infrastructure
        efficiency programme carried out by InBev called Global Infrastructure and
        Services Efficiency Programme (GIEP).
  ***InBev
        and Intra-group Companies***
  On
        January 11, 2005, InBev and certain intra-group companies executed an
        International Intra-Group Data Protection Agreement pursuant to which they
        agreed to provide adequate safeguards with respect to the protection of privacy
        and fundamental rights and freedoms of individuals in the transfer of personal
        information.
  **Financial
        Information**
  **CONSOLIDATED
        FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION**
  **Consolidated
        Financial Statements**
  See
        “Financial Statements”.
  **Legal
        Proceedings**
  Except
        as set forth below, there are no legal proceedings to which we are party,
        or to
        which any of our properties are subject which, either individually or in
        the
        aggregate, may have a material adverse effect on our results of operations,
        liquidity or financial condition. For further details, see Note 13 of our
        consolidated financial statements.
  ***Tax
        matters***
  As
        of March 31, 2006, we had approximately 2,758 tax claims pending, including
        judicial and administrative proceedings. Most of these claims relate to the
        ICMS
        tax and the IPI excise tax. We have made provisions of R$ 667.2 million in
        connection with those tax proceedings for which we believe there is a probable
        chance of loss.
  Among
        the pending tax claims, there are claims filed by AmBev against Brazilian
        tax
        authorities alleging that certain taxes are unconstitutional. Such tax
        proceedings include claims for income taxes, ICMS, IPI tax and revenue taxes
        (“PIS” and “COFINS”). As these claims are contingent on obtaining favorable
        judicial decisions, the corresponding assets which might arise in the future
        are
        only recorded once it becomes certain that we will receive the amounts
        previously paid or deposited.
  *Value
        added tax, excise tax and taxes on net sales*
  In
        October 1996, a tax law allowed credits of ICMS on capital expenditures to
        be
        offset against the amounts payable on such tax. Based on this law and on
        certain
        constitutional principles, some of our subsidiaries filed several lawsuits
        with
        state courts to allow them to offset ICMS tax paid prior to 1996 and with
        the
        IPI excise tax paid in 1997 against similar taxes payable in 1996. We made
        a
        provision regarding the amounts offset, including the interest and penalties
        that could become payable should we lose these lawsuits.
  During
        1999, a new law came into effect requiring Brazilian companies to pay PIS
        and
        COFINS not only on sales and services net sales, but also on financial income.
        We have not been paying PIS and COFINS as required by the new law, as we
        have
        obtained injunctions permitting the non-payment of these additional taxes
        on the
        basis that the new law is unconstitutional. On November 9, 2005, a leading
        case
        unrelated to AmBev was adjudicated by the Brazilian Supreme Court in favor
        of
        taxpayers. During the 3 months ended March 31, 2006, we have obtained favorable
        final and non-appealable decisions in connection with such PIS and COFINS
        claims
        which allowed us to revert $36 million of previously recorded provisions.
        As of
        March 31, 2006, we had provisions in connection with cases still pending
        in the
        amount of R$ 366.7 million.
 
 91
  *Income
        tax and social contribution*
  Beginning
        in 1997, an amendment to the tax laws confirmed the deductibility of interest
        attributable to shareholders’ equity for social contribution and income tax
        purposes. Brahma filed a lawsuit with the Federal Courts of Rio de Janeiro
        requesting the recovery of social contribution taxes previously paid for
        the
        fiscal year of 1996 in the amount of R$ 40.1 million. The Federal Court granted
        Brahma an injunction recognizing the deductibility of payment of interest
        attributable to shareholders’ equity and, as a result, allowed Brahma to suspend
        the payment of social contribution amounts owed in 1999 up to the amount
        not
        deducted in 1996, thereby allowing Brahma to offset the amounts of taxes
        unduly
        paid in 1996 against the amounts owed in 1999. In April 2001, the Federal
        Appellate Court reversed the Federal Court’s injunction. On April 3, 2002, we
        appealed the Federal Appellate Court’s judgment to the Brazilian Supreme Court
        and to the Superior Court of Justice.
  During
        the first quarter of 2005, we received a number of assessments from Brazilian
        tax authorities relating to earnings of our foreign subsidiaries, in the
        total
        amount of approximately R$ 3 billion. Based on the advice of external
        counsel, we believe that such assessments are without merit and, accordingly,
        we
        have not recorded any provision in connection therewith. We have estimated
        the
        total exposures of possible (but not probable) losses, which are not recorded
        as
        liabilities, to be of approximately R$ 2 billion in connection with those
        assessments, and the remaining is estimated to be a remote loss. We believe
        that
        our estimates are based on reasonable assumptions and assessments of external
        legal counsel, but should the worst case scenario develop, subjecting us
        to
        losses in all cases, the net impact on the statement of operations would
        be an
        expense for this amount.
  We
        are currently parties to legal proceedings with the State of Rio de Janeiro
        where we are challenging such State’s attempt to assess ICMS with respect to
        irrevocable discounts granted by the Company in January 1996 and February
        1998.
        These proceedings are currently before the Superior Court of Justice and
        the
        Brazilian Supreme Court, and involve the amount of approximately R$ 246 million
        as of May 30, 2006 which we have recorded as a possible (but not probable)
        loss.
        We believe that such estimate is based on reasonable assumptions and assessments
        of external counsel but should we lose such proceedings the net impact on
        our
        statement of operations would be an expense for this amount.
  In
        order to carry out certain activities, including obtaining BNDES financings,
        certain tax incentives or registering the sale of real estate we, like other
        Brazilian corporations, are required to obtain federal and state tax and
        social
        security good standing certificates, which are normally valid for six months.
        In
        circumstances in which such certificates are not issued by the competent
        authority on the basis of the existence of tax claims that we believe are
        without merit or need further information, we have sought court injunctions
        requesting such certificates to be issued. As of December 31, 2005, we had
        court
        bonds (cartas de fiança) issued in connection with such injunctions in the
        amount of approximately R$ 236 million.
  ***Labor
        matters***
  We
        are involved in approximately 10,500 legal proceedings with former and current
        employees, mainly relating to overtime, dismissals, severance, overtime,
        health
        and safety premiums, supplementary retirement benefits and other matters,
        all of
        which are awaiting judicial resolution.
  We
        have made provisions of R$ 278,7 million as of March 31, 2006, in connection
        with all labor proceedings in which we believe there is a probable chance
        of
        loss. In Brazil, it is not unusual for a company to be a defendant in a large
        number of labor claims.
 
 92
  ***Civil
        claims***
  As
        of April 30, 2006 we had 4,189 civil claims pending, including distributors
        and
        product-related claims. We are the plaintiff in 1,647 and the defendant in
        2,542
        of these claims, respectively. We have established provisions in the amount
        of
        R$ 74.5 million as of April 30, 2006 in connection with civil claims in which
        we
        believe there is a probable chance of loss.
  On
        February 29, 2000, five former shareholders of Antarctica who had exercised
        appraisal rights under the Antarctica conversion jointly filed a lawsuit
        against
        us and Antarctica in the civil courts of the City of São Paulo. These former
        shareholders claim that the decision taken at the Antarctica shareholders’
meeting held on September 2, 1999 changing the valuation method (from book
        value
        to economic value) that was used to determining the appraisal value of
        withdrawing Antarctica shareholders was invalid because it occurred after
        the
        plaintiffs had exercised their withdrawal rights. These plaintiffs claim
        compensation in the total amount of approximately R$ 0.8 million (the current
        amount is R$ 2.0 million). On July 21, 2001, the court dismissed the action
        against Antarctica. On December 21, 2001, the judge adjudicated in favor
        of the
        minority shareholders requiring us to pay the difference between the value
        of
        the shares. We filed an appeal against this decision, and the appeal was
        denied
        by the São Paulo State High Court on October 27, 2005. We have appealed this
        ruling to the Superior Court of Justice, and we await its judgment. We will
        make
        a provision in connection with this claim shortly, in the amount of
        approximately R$ 2.3 million.
  A
        number of class action lawsuits have been commenced in various U.S. states
        against multiple defendants in the alcohol industry (including Labatt Brewing
        Company Limited and affiliated entities), alleging intentional and negligent
        marketing of alcohol to minors. Labatt entities have retained external legal
        counsel and joined a coordinated joint defense group to help manage information
        flow, overall strategy and defense costs. It is too early to provide any
        assessment of possible exposure.
  **Options
        and Warrants**
  In
        2002, AmBev decided to request a ruling from the CVM in connection with a
        dispute between AmBev and some of its warrant holders regarding the criteria
        used in the calculation of the strike price of certain AmBev warrants. On
        March
        31, 2003 and April 17, 2003, the CVM ruled twice that the criteria used by
        AmBev
        to calculate the strike price was correct. In response to the CVM’s final
        decision and seeking to reverse it, some of the warrant holders filed separate
        lawsuits before the courts of São Paulo and Rio de Janeiro.
  Although
        the warrants expired without being exercised, the warrant holders claim that
        the
        strike price should be reduced to take into account the strike price of certain
        stock options granted by AmBev to its officers and employees since 1996 to
        acquire shares of AmBev, as well as for the strike price of other stock purchase
        warrants issued in 1993 by Companhia Cervejaria Brahma. The warrant holders
        requested preliminary injunctions for: (i) the immediate issuance by AmBev
        of
        the shares corresponding to the total amount of warrants held by the plaintiffs
        and (ii) the right to subscribe for these shares at the substantially lower
        subscription price described above.
  We
        have been notified of six claims from 11 holders arguing that they would
        be
        entitled to those rights. Three judicial decisions were issued in favor of
        AmBev
        in the State of Rio de Janeiro and two were issued in favor of AmBev in the
        State of São Paulo, all of them denying the warrant holders’ right to subscribe
        for the shares at the lower price intended. One judicial decision was issued
        against AmBev in the State of São Paulo, recognizing the right of three warrant
        holders to subscribe for the shares at the lower price. All such decisions
        will
        be subject to the analysis of the Appellate Courts of the States of São Paulo
        and Rio de Janeiro.
  In
        the event the plaintiffs prevail in all of the above proceedings, we believe
        that the corresponding dilution for the existing shareholders would be the
        difference between the values below and the net book value of such shares
        at the
        time they are issued, multiplied by the number of shares involved. The Company
        has estimated that the aggregate subscription price of all the relevant shares
        should be R$ 1,022.4 million, based on a strike price of R$ 0.90977 for
        preferred shares and R$ 0.91595 for voting shares and warrants entitling
        its
        holders to subscribe for 29,602,450 common shares and 1,093,920,115 preferred
        shares, should this strike price deemed correct by AmBev prevail in all
        lawsuits. Two of the claims, filed by the plaintiffs who hold warrants that
        entitle them to subscribe for, in the aggregate, 435,563,170 preferred shares
        and 12,414,070 ordinary shares, argue that the strike price should respectively
        be R$ 0.135805 and R$ 0.18575.
  93
  One
        of
        the claims, filed by the plaintiffs who hold warrants that entitle them to
        subscribe for, in the aggregate, 103,160,745 preferred shares and 5,022,825
        ordinary shares, argues that the strike price should respectively be R$ 0.02872
        and R$ 0.03352. One of the claims, filed by the plaintiffs who hold warrants
        that entitle them to subscribe for, in the aggregate, 4,859,800 preferred
        shares, argues that the strike price should be R$ 0.38116. The other holders
        of
        warrants, which entitle them to subscribe for, in the aggregate, 550,336,400
        preferred shares and 12,165,555 ordinary shares, argue that they should be
        entitled to subscribe for shares at the price of the lowest exercise of stock
        options, a price which would be subject to liquidation during the judicial
        proceedings. AmBev has filed counterclaims on these lawsuits, three of which
        were granted in the State of Rio de Janeiro, and three of which were rejected
        in
        the State of São Paulo. One of the decisions that rejected a counterclaim has
        been analyzed and confirmed, based on lack of standing to file such
        counterclaim, by the Superior Court of Justice in Brasilia.
  In
        addition, one warrant holder filed a lawsuit for damages against AmBev before
        the courts of São Paulo. This holder claims that our setting of a high strike
        price caused such holder damages by not allowing such holder to exercise
        his
        warrants at a lower strike price. The court issued a decision denying such
        holders’ request. The warrant holder appealed against such decision, which has
        not been analyzed by the Appellate Court of the State of São Paulo. The amount
        of the indemnification to be paid by AmBev in case the Appellate Court grants
        such appeal is approximately R$ 12 million.
  Based
        on advice from our external counsel, we believe it is possible that we will
        prevail on the claims from the holders and the counterclaims filed against
        the
        holders. We have not made any provisions in connection with these claims.
        However, no assurance can be given that favorable decision that we obtained
        will
        be upheld by the Appellate Courts, or that the unfavorable decision issued
        will
        be reversed. Except for the lawsuit for damages, as these disputes are based
        on
        whether we should receive as a subscription price a lower price than the
        price
        that we consider correct, without any contingent liability (except for legal
        fees), a provision of amounts with respect to these proceedings is not
        applicable.
  ***Distributors
        and product-related claims***
  Numerous
        claims have been filed against us by former distributors whose contracts
        were
        terminated. Most claims are still under review by first instance and state
        Appellate Courts, and a few are currently being reviewed by the highest level
        Court of Appeals in Brazil, the Superior Court of Justice and the Federal
        Supreme Court.
  The
        aggregate amount of these claims was R$ 566.0 million as of April 30, 2006.
        AmBev has established provisions in the amount of R$ 36.7 million in connection
        with these claims as of April 30, 2006, based on the advice of outside legal
        counsel. We intend to continue a program of increasing our direct distribution
        and expect this program to result in additional lawsuits.
  There
        is one administrative proceeding against us, which was commenced by distributors
        who challenge the legality of our market practices. See “Antitrust Matters—The
        Combination” below.
  ***Antitrust
        matters***
  *The
        Combination*
  We
        currently have a number of antitrust investigations pending against us before
        Brazilian antitrust authorities.
  The
        first proceeding refers to complaints brought by the Brazilian Association
        of
        Antarctica Distributors (“ABRADISA”), alleging that provisions in our
        distribution agreements are illegal exclusivity provisions. After appropriate
        investigations, on February 22, 2002, the Brazilian antitrust authorities
        decided to accept the proceedings against us to determine whether there is
        circumstantial evidence relating to unfair market practices. The antitrust
        authorities are seeking to determine whether or not the following main practices
        are taking place: (i) establishment of minimum quotas for retailers to purchase
        our beverages; (ii) imposition of sale price to retailers; (iii) damage to
        retailers’ fair competition due to the sharing of the distribution network among *Antarctica* , *Skol* and *Brahma* products; (iv) unjustified increases in price; and (v) unfair competition
        between retailers and direct distribution.
 
 94
  On
        March
        29, 2002, we filed our defense. In March 2003 CBB and its forty-one distributors
        executed a settlement agreement ( *Termo
        de Transação* )
        that
        has been fully complied with by all its parties. On November 4, 2003, the
        ABRADISA President filed a petition in this proceeding before the Brazilian
        antitrust authorities stating that the settlement agreement has been fully
        complied with by all its parties and that ABRADISA has no interest in continuing
        with this proceeding. On December 6, 2005, in response to a request from
        the SDE
        (Secretary of Economic Law) we stated that no further evidence was technically
        required in these proceedings, which we requested to be dismissed.
  On April 24, 2003, Cervejaria Braumeister, a small brewer with which we had
        executed five exclusivity agreements (one for each store), filed a complaint
        with the Brazilian antitrust authorities alleging that we have breached the
        antitrust performance agreement that we signed with CADE by imposing exclusivity
        on them. On October 20, 2003, we presented our defense alleging that there
        was
        no imposition of exclusivity, but that the exclusivity was negotiated between
        the parties. To date, the case is in its discovery phase. We expect this
        complaint to be dismissed as there are three lower court judicial decisions
        which were granted in our favor.
  On
        February 13, 2004, the Labor Union of the Food and Beverages Industry Workers
        ( *Sindicato
        dos Trabalhadores nas Indústrias de Alimentação e Bebidas* )
        of the
        city of Jacareí, State of São Paulo, filed a claim with the Brazilian antitrust
        authorities in connection with the lay-off of employees in our beer plant
        in
        Jacareí. In this claim, this union alleges that we have breached our antitrust
        performance agreement signed with CADE pursuant to which we have committed
        to
        maintain the level of employment in our plants. On June 14, 2004, we presented
        our defense. We expect this claim to be dismissed as we believe we have complied
        with all the provisions of the mentioned antitrust performance
        agreement.
  In 2004, Schincariol, which is currently one of our largest competitors,
        filed a
        complaint with the Brazilian antitrust authorities asking them to investigate
        whether our loyalty program named *Tô
        Contigo* complies
        with Brazilian antitrust laws and alleging that AmBev had not complied with
        the
        performance agreement signed with CADE due to AmBev’s conduct in the market. The
        Brazilian antitrust authorities have not yet made any decision on this
        complaint, as it is in its discovery phase.
  *Joint
        Ventures and Alliances*
  Brahma’s
        joint ventures with Miller and Unilever Brasil Ltda., its franchise agreement
        with PepsiCo and *Skol* ’s
        licensing agreement with Carlsberg were all required to be submitted to CADE
        for
        approval. In October 1998, CADE approved the franchise agreement with PepsiCo
        International, Inc. In early 1999, CADE approved Brahma’s joint venture with
        Unilever Brasil Ltda., which resulted in the creation of Ice Tea do Brasil
        Ltda.
        Also in 1999, the *Skol* licensing agreement with Carlsberg was approved by CADE. The *Miller* license
        agreement was approved in 1997 and the performance agreement entered into
        in
        connection with such transaction led to the execution of a production agreement
        with Dado Bier, which has expired in December 2005.
  CADE
        approved on July 16, 2004, our cooperation with Souza Cruz S.A. for the
        implementation of “ *Cportal* ”,
        a
        business-to-business website. On November 28, 2001, CADE unconditionally
        approved the cooperation with Souza Cruz S.A. regarding the implementation
        of
        Agrega, a business-to-business website, through which the acquisition of
        MRO
        (materials, repairs and operation) products and services would be negotiated.
        The Agrega joint venture was commenced on November 30, 2000.
  As
        a result of PepsiCo’s acquisition of Gatorade and subsequent licensing of the
        trademark to us, CADE analyzed the isotonic products market and on July 14,
        2004
        approved the transaction with restrictions, including the sale of *Marathon* .
        On
        April 13, 2006, we sold the *Marathon* brand to
        Energia On Line Ltda.
  On
        July 23, 2003, CADE approved with no restrictions our agreement with Quinsa
        to
        distribute Quinsa beer in Brazil. The distribution of Brahma in Argentina
        has
        been approved by the Argentine antitrust authorities upon the approval of
        the
        acquisition of our initial shareholding in Quinsa. Such decision required
        us to
        sell certain assets in Argentina. See “Information on the Company—Interest in
        Quinsa”
 
 95
  In
        July 2006, Ransa Comercial S.A., a company which is part of the Romero business
        group (“Romero Group”), signed an agreement to purchase a 25% interest in
        AmBevPerú for an amount of approximately US$ 3.7 million. This transaction is
        aimed to enable AmBev to benefit from the local know-how of a strategic partner
        for the Peruvian market such as the Romero Group, thus strengthening AmBevPerú’s
        operations.
  ***InBev-AmBev
        Transactions***
  On
        June 15, 2005, CADE issued its unrestricted approval of the
        transaction.
  ***Other***
  In
        October 2004, the Canadian Competition Bureau commenced an investigation
        into
        certain Labatt sales activities in Quebec, alleging possible re-sale price
        maintenance in the retail sale of beer. On November 23, 2005, as part of
        a
        settlement with the Bureau, Labatt pleaded guilty to a charge of price
        maintenance on discount beer sold by nine independent retailers located
        primarily in Sherbrooke, Quebec, and paid a fine of C$250,000.
  In
        addition, 42 Canadian brewers are party to an Industry Standard Bottle Agreement
        (“ISBA”) whereby the parties have agreed to use only a particular type of bottle
        which are then recycled to ISBA signatories on a proportionate basis for
        re-use.
        Brick Brewing Company, a small Ontario brewer that is not an ISBA signatory,
        commenced litigation in 2002 and obtained an injunction pending determination
        of
        Brick’s continued right of access to  industry bottles. Brick also took its
        position to the Canadian Competition Bureau. At the same time, the Bureau
        launched a civil investigation of the ISBA, contending that it may have the
        effect of preventing/lessening competition for beer products in Canada. To
        date,
        no further action has been taken by the Bureau.
  ***CVM***
  *Caixa
        de Previdencia dos Funcionarios do Banco do Brasil-* PREVI,
        a
        Brazilian pension fund holding approximately 6.07% of AmBev’s capital stock as
        of May 31, 2005, filed an administrative complaint against AmBev with the
        CVM on
        April 8, 2004, alleging abuse of position by AmBev’s controlling shareholders
        and breach of fiduciary duty by AmBev’s directors in connection with the
        approval of the InBev-AmBev Transactions, appropriation of commercial
        opportunity and inadequate disclosure. The complaint requested, among other
        things, that CVM render an opinion contesting the legality of the transactions
        and intervene to prevent the closing of the Incorporação. On May 4, 2004, AmBev
        filed a response to the complaint with the CVM, which was supported by several
        opinions of renowned Brazilian legal scholars. The complaint was reviewed
        by the
        staff of CVM in a decision that rejected all the complaints of PREVI, which
        subsequently filed an administrative appeal to the CVM. The CVM, in a decision
        issued on December 16, 2004, declared that (i) there was no basis to conclude
        that there had been an abuse of position by the controlling shareholders
        or
        conflict of interests in relation to them, and (ii) that there was no indication
        of an appropriation of a commercial opportunity by the directors of AmBev,
        without prejudice to any further investigation that the staff of the CVM
        might
        conduct, as needed. Moreover, the CVM expressed its opinion that directors
        involved in the InBev-AmBev Transactions could not have intervened in the
        AmBev
        board resolutions related thereto, recommending that the staff investigate
        any
        possible violation of the fiduciary obligations of one specific director
        who was
        a shareholder of Braco (now known as InBev Brasil) and ECAP, the direct
        controlling shareholders of AmBev and took part in AmBev’s board resolution.
        There would be a quorum to approve the relevant resolutions even without
        the
        vote of such director. The CVM recommended also that the staff investigate
        the
        adequacy of the disclosure proceeding of the transactions. So far, we have
        not
        been informed of any specific administrative action in relation thereto.
  Following
        the announcement of the InBev-AmBev Transactions, we were notified by the
        CVM
        that it detected what it perceived to be unusual trading patterns in shares
        of
        AmBev in the weeks preceding the announcement. The CVM, in accordance with
        what
        we understand to be its standard procedures, requested from us and from InBev
        Brasil a list of all directors, officers, employees, accountants, lawyers,
        investment bankers and other consultants involved in the InBev-AmBev
        Transactions. That information has been supplied to the CVM. According to
        certain public statements of staff members and commissioners of the CVM,
        the CVM
        is investigating the possibility that the trading of AmBev shares based on
        insider information occurred. We believe that CVM’s investigation is pending;
        however, we have no indication of when the investigation will conclude.
  96
  ***Environmental
        matters***
  On
        November 7, 2001, the Public Attorney ( *Promotoria* )
        of
        Manaus notified us that a criminal lawsuit had been initiated against IBANN,
        our
        subsidiary, and three of its officers in the courts of the State of Manaus
        claiming damages for harm allegedly done to the *Igarapé
        dos Franceses* forest.
        On March 21, 2002, the Public Attorney proposed a settlement through a series
        of
        environmental projects. On November 19, 2002 we entered into an agreement
        with
        the Public Attorney which included the reforestation of an area of the *Igarapé
        dos Franceses* forest
        and the purchase of equipment used by the governmental agencies to protect
        the
        environment. We have complied with all the terms of the agreement [which
        will be
        homologated at a judicial hearing which has yet to be scheduled.
  In August 2003, Oliveira Comércio de Sucatas filed a complaint with the Public
        Attorney of the city of Pedreira, in the State of São Paulo, alleging that CBB
        was using the waste disposal site of the city as a disposal for toxic garbage.
        In September 2003, we presented our response and have performed all the
        necessary studies which allowed us to conclude that CBB had not disposed
        of any
        toxic garbage and that there were no actions causing harm to the environment.
        This case is in the discovery phase.
  The
        Public Attorney of the State of Rio de Janeiro has requested the initiation
        of a
        civil investigation to investigate anonymous reports of the pollution allegedly
        caused by Nova Rio, AmBev’s beer plant located in the city of Rio de Janeiro.
        Currently this investigation is in the discovery phase. We expect this
        investigation to be dismissed as we have presented several expert opinions,
        including one from the State environmental agency (“FEEMA”), showing lack of
        environmental damages. Simultaneously, the police of Rio de Janeiro have
        requested the initiation of a criminal investigation to investigate the author
        of the crime. We expect this investigation will be dismissed at the same
        time of
        the civil investigation mentioned above. Due to the wide repercussion of
        this
        matter in the media, the Legislative Branch initiated a Parliamentary Commission
        of Investigation ( *Comissão
        Parlamentar de Inquérito* - “CPI”)
        to investigate the facts. We expect the CPI to be dismissed since we have
        presented expert opinions showing the lack of any environmental damages.
  **Dividend
        Policy**
  For
        information regarding our dividend policy, see “Key Information—Selected
        Financial Data—Dividends—Dividend Policy”.
  **Significant
        Changes**
  Except
        as otherwise described in our annual financial statements and in this annual
        report, there have been no significant changes in our business, financial
        conditions or results since December 31, 2004.
  **The
        Offer and Listing**
  **PRINCIPAL
        MARKET AND TRADING MARKET PRICE INFORMATION**
  AmBev
        is registered as a publicly held company with the CVM and has been listed
        on the
        Brazilian stock exchanges since December 17, 1998 under the name Aditus
        Participações S.A. Because AmBev was originally incorporated as a shelf company
        without any operational activity, there was no market for AmBev shares until
        September 17, 1999, two business days after the Antarctica conversion. From
        September 17, 1999 until September 15, 2000, the first date following the
        Brahma
        conversion, there was a limited trading market for AmBev shares. For a
        description of the combination transactions that led to the formation of
        AmBev,
        including the Antarctica and Brahma conversions, see “Information on the
        Company—The Combination” and “Information on the Company—Brazilian Antitrust
        Approval”. AmBev shares are quoted on Bovespa under the symbols “AMBV3” (common
        shares) and “AMBV4” (preferred shares). Until April 28, 2000, the AmBev shares
        were traded on the Rio de Janeiro Stock Exchange and other Brazilian stock
        exchanges under the symbols “AMBVON” (common shares) and “AMBVPN” (preferred
        shares).
  On
        October 20, 2000, the shareholders of AmBev present at an extraordinary general
        meeting unanimously approved a five-for-one stock split of the Company’s
        outstanding common and preferred shares.
  97
  On
        May 31, 2005, the shareholders of AmBev approved a stock bonus at an
        extraordinary general meeting, granting one common share for each five shares
        owned by each shareholder.
  **Shares**
  The
        table below shows the quoted high and low closing sales prices in *reais* on
        Bovespa for AmBev’s preferred and common shares for the indicated periods. All
        shares prices have been restated to reflect AmBev’s stock bonus described in the
        preceding paragraph.
  Trading
          Prices on the Bovespa: Common and Preferred Shares(1)
 **Per
                    1,000 Common Shares**
                
                **Per
                    1,000 Preferred Shares****High**
                
                **Low**
                
                **High**
                
                **Low**(in*reais*)
                
                (in*reais*)**Annual**2005
                
                R$
                1,168
                
                R$
                500
                
                R$
                902
                
                R$
                5572004
                
                
                1,183
                
                
                529
                
                
                693
                
                
                4372003
                
                
                533
                
                
                346
                
                
                629
                
                
                4032002
                
                
                408
                
                
                292
                
                
                468
                
                
                3332001
                
                
                450
                
                
                292
                
                
                494
                
                
                328**Quarterly**2006*First
                    Quarter*
                
                R$
                818
                
                R$
                740
                
                R$
                948
                
                R$
                860*Second
                    Quarter*
                
                
                910
                
                
                744
                
                
                1,014
                
                
                8042005*First
                    Quarter*
                
                R$
                1,168
                
                R$
                875
                
                R$
                702
                
                R$
                557*Second
                    Quarter*
                
                
                792
                
                
                500
                
                
                753
                
                
                587*Third
                    Quarter*
                
                
                680
                
                
                582
                
                
                835
                
                
                725*Fourth
                    Quarter*
                
                
                772
                
                
                615
                
                
                902
                
                
                7502004*First
                    Quarter*
                
                R$
                833
                
                R$
                529
                
                R$
                693
                
                R$
                442*Second
                    Quarter*
                
                
                1,025
                
                
                790
                
                
                524
                
                
                437*Third
                    Quarter*
                
                
                1,027
                
                
                950
                
                
                570
                
                
                515*Fourth
                    Quarter*
                
                
                1,183
                
                
                996
                
                
                651
                
                
                549**Monthly**2006*January*
                
                R$
                800
                
                R$
                750
                
                R$
                948
                
                R$
                895*February*
                
                
                806
                
                
                740
                
                
                936
                
                
                860*March*
                
                
                818
                
                
                770
                
                
                940
                
                
                890*April*
                
                
                884
                
                
                824
                
                
                1014
                
                
                948*May*
                
                
                910
                
                
                815
                
                
                1005
                
                
                915*June*
                
                
                869
                
                
                744
                
                
                983
                
                
                804*July*
                
                
                844
                
                
                782
                
                
                943
                
                
                8622005*December*
                
                R$
                772
                
                R$
                730
                
                R$
                902
                
                R$
                841
 
 *Source* :
          Bloomberg
  **ADRs**
  AmBev
        has registered two classes of American Depositary Shares (“ADSs”) pursuant to
        the Securities Exchange Act: ADSs evidenced by American Depositary Receipts
        (“ADRs”) representing 100 preferred shares, and ADSs evidenced by ADRs
        representing 100 common shares. The ADSs have been listed on the New York
        Stock
        Exchange since September 15, 2000 and trade under the symbols “ABV.c” (ADSs
        representing AmBev common shares) and “ABV” (ADSs representing AmBev preferred
        shares). On October 20, 2000, the shareholders present at an extraordinary
        general meeting unanimously approved a five-for-one stock split of AmBev’s
        outstanding common and preferred shares. However, AmBev’s ADSs were not split.
        Prior to the stock split, each ADS represented 20 common or preferred shares
        of
        AmBev. Since the stock split did not affect AmBev’s ADSs, after the stock split
        each ADS represented 100 common or preferred shares of AmBev. Consequently,
        the
        stock split did not have a significant impact on the price of our ADRs.
  98
  As
        of April 30, 2006, there were 11 registered holders of our Common ADSs, with
        7,509,871 ADS outstanding. As of April 30, 2006, there were 15 registered
        holders of our Preferred ADSs, with 68,245,664 ADS outstanding.
  The
        information presented in the table below represents, for the indicated periods,
        the reported high and low closing sales prices of AmBev ADRs quoted in U.S.
        dollars on the New York Stock Exchange. All shares prices have been restated
        to
        reflect AmBev’s stock bonus issued on May 31, 2005.
  **Trading
          Prices on the New York Stock Exchange: ADRs Representing 100 Common and
          Preferred Shares(1)**
 **Per
                    1,000 Common Shares ADR**
                
                **Per
                    1,000 Preferred Shares ADR****High**
                
                **Low**
                
                **High**
                
                **Low**(*in
                    U.S.$*)
                
                (*in
                    U.S.$*)**Annual**2005
                
                U.S.$
                43.75
                
                U.S.$
                21.45
                
                U.S.$
                40.43
                
                U.S.$
                20.992004
                
                
                43.38
                
                
                17.08
                
                
                24.49
                
                
                14.012003
                
                
                17.17
                
                
                9.94
                
                
                22.05
                
                
                11.242002
                
                
                15.63
                
                
                8.48
                
                
                18.58
                
                
                9.252001
                
                
                21.67
                
                
                10.24
                
                
                24.81
                
                
                12.28**Quarterly**2006*First
                    Quarter*
                
                U.S.$
                37.70
                
                U.S.$
                33.25
                
                U.S.$
                44.35
                
                U.S.$
                38.54*Second
                    Quarter*
                
                
                43.84
                
                
                31.59
                
                
                48.57
                
                
                34.022005*First
                    Quarter*
                
                U.S.$
                43.75
                
                U.S.$
                35.00
                
                
                U.S.$26.55
                
                U.S.$
                20.99*Second
                    Quarter*
                
                
                25.50
                
                
                21.45
                
                
                31.24
                
                
                23.26*Third
                    Quarter*
                
                
                30.11
                
                
                23.65
                
                
                37.29
                
                
                29.30*Fourth
                    Quarter*
                
                
                34.70
                
                
                27.15
                
                
                40.43
                
                
                33.272004*First
                    Quarter*
                
                U.S.$
                29.09
                
                U.S.$
                17.08
                
                U.S.$
                24.41
                
                U.S.$
                15.48*Second
                    Quarter*
                
                
                32.64
                
                
                27.39
                
                
                17.35
                
                
                14.01*Third
                    Quarter*
                
                
                35.42
                
                
                31.00
                
                
                19.47
                
                
                17.19*Fourth
                    Quarter*
                
                
                43.38
                
                
                35.42
                
                
                24.49
                
                
                19.62**Monthly**2006*January*
                
                U.S.$
                35.87
                
                U.S.$
                33.25
                
                U.S.$
                41.65
                
                U.S.$
                38.54*February*
                
                
                37.03
                
                
                33.32
                
                
                43.66
                
                
                38.89*March*
                
                
                37.70
                
                
                35.15
                
                
                44.35
                
                
                40.15*April*
                
                
                41.60
                
                
                38.22
                
                
                48.50
                
                
                44.37*May*
                
                
                43.84
                
                
                34.16
                
                
                48.57
                
                
                39.49*June*
                
                
                37.50
                
                
                31.59
                
                
                43.48
                
                
                34.02*July*
                
                
                38.50
                
                
                34.95
                
                
                43.60
                
                
                38.712005*December*
                
                U.S.$
                34.70
                
                U.S.$
                31.02
                
                U.S.$
                40.43
                
                U.S.$
                36.10
 
 *Source* :
          Bloomberg
 99
  **REGULATION
        OF THE BRAZILIAN SECURITIES MARKET**
  The
        Brazilian securities markets are regulated by the CVM, which has regulatory
        authority over the stock exchanges and securities markets, as well as by
        the
        Central Bank, which has, among other powers, licensing authority over brokerage
        firms and regulates foreign investment and foreign exchange transactions.
        The
        Brazilian securities markets are governed by Law No. 6,385 dated December
        7,
        1976 (the Brazilian Securities Law), and by Brazilian Corporate Law, as amended
        and supplemented. These laws and regulations, among others, provide for
        disclosure requirements, restrictions on insider trading and price manipulation,
        and protection of minority shareholders. They also provide for licensing
        and
        oversight of brokerage firms and governance of Brazilian stock exchanges.
        However, the Brazilian securities markets are not as highly regulated and
        supervised as U.S. securities markets.
  Under
        Brazilian Corporate Law, a company is either publicly held (listed), a *companhia
        aberta* ,
        such as
        AmBev, whose shares are publicly traded on the Bovespa, or privately held
        (unlisted), a *companhia
        fechada* .
        All
        listed companies are registered with the CVM and are subject to reporting
        and
        regulatory requirements. The Brazilian Corporate Law allows the CVM to classify
        listed companies according to the kind of securities they issue. A company
        registered with the CVM may trade its securities either on the Brazilian
        stock
        exchanges or in the Brazilian over-the-counter market. Shares of companies
        like
        AmBev traded on the Bovespa may not simultaneously be traded on the Brazilian
        over-the-counter market. The shares of a listed company, including AmBev,
        may
        also be traded privately subject to several limitations. To be listed on
        the
        Bovespa a company must apply for registration with the CVM and the Bovespa.
  The
        trading of securities on the Brazilian stock exchanges may be halted at the
        request of a company in anticipation of a material announcement. Companies
        are
        sometimes required by law to request such suspension. Trading may also be
        suspended on the initiative of a Brazilian stock exchange or the CVM, among
        other reasons, based on or due to a belief that a company has provided
        inadequate information regarding a significant event or has provided inadequate
        responses to inquiries by the CVM or a stock exchange.
  **Trading
        on the Brazilian Stock Exchanges**
  In
        January 2000, a formal protocol was signed merging the previous nine Brazilian
        stock exchanges. Following the merger, Bovespa is the only Brazilian stock
        exchange on which private equity and private debt may be traded. Bovespa
        is a
        not-for-profit entity owned by its member brokerage firms. Trading on Bovespa
        is
        limited to member brokerage firms.
  Bovespa
        trading sessions are from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 5:00
        p.m., São Paulo time. During daylight saving time in the United States, the
        sessions are held from 9:00 a.m. to 12:00 p.m. and from 1:00 p.m. to 4:00
        p.m.,
        São Paulo time (closing call is from 4:55 p.m. to 5:00 p.m.). Equity trading
        is
        executed fully electronically through an order-driven trading system called
        Megabolsa. Additionally, the home broker system through the Internet has
        been
        established allowing retail investors to transmit orders directly to the
        Exchange. Bovespa also permits trading from 5:45 p.m. to 7:00 p.m. on an
        online
        system connected to Megabolsa and Internet brokers called the After Market.
        The
        After Market session is restricted to certain stocks that were traded through
        the electronic system. Trading on the After Market is subject to regulatory
        limits on price volatility and on the volume of shares transacted through
        Internet brokers. CVM has discretionary authority to suspend trading in shares
        of a particular issuer under specific circumstances. Securities listed on
        the
        Bovespa may also be traded off the exchange under specific circumstances,
        but
        such trading is very limited.
  Settlement
        of transactions is effected three business days after the trade date, without
        adjustment for inflation. Delivery of and payment for shares are made through
        the facilities of separate clearinghouses for each exchange, which maintain
        accounts for the member brokerage firms. The seller is ordinarily required
        to
        deliver the shares to the exchange on the second business day following the
        trade date. The clearing house for Bovespa is Companhia Brasileira de Liquidação
        e Custodia (“CBLC”), which is owned by Bovespa and its members.
  In
        order to better control volatility, Bovespa has adopted a “circuit breaker”
mechanism pursuant to which trading sessions may be suspended for a period
        of 30
        minutes or one hour whenever the index of the stock exchange falls 10% or
        15%,
        respectively, compared to the previous day’s closing index. If the market falls
        more than 15% compared to the previous day no more pauses are taken. The
        “circuit breaker” is not allowed to be started during the last 30 minutes of the
        trading session.
 
 100
  Although
        the Brazilian equity market is Latin America’s largest in terms of market
        capitalization, it is smaller, more volatile and less liquid than the major
        U.S.
        and European securities markets. As of December 31, 2005, the aggregate market
        capitalization of all the companies listed on Bovespa was equivalent to
        approximately R$1,129 billion. Although all of the outstanding shares of
        a
        listed company are actually available for trading by the public, in most
        cases
        fewer than half of the listed shares are actually traded by the public because
        the remainder of a listed company’s shares are usually held by small groups of
        controlling persons, by governmental entities or by one principal shareholder.
        For this reason, data showing the total market capitalization of Brazilian
        stock
        exchanges tend to overstate the liquidity of the Brazilian equity securities
        market.
  There
        is also significantly greater concentration in the Brazilian securities markets.
        During the year ended December 31, 2005, the ten most actively traded issues
        represented approximately 51.3% of the total volume of shares traded on Bovespa,
        comparable to the 49.5% of total volume in 2004.
  Trading
        on Brazilian stock exchanges by non-residents of Brazil is subject to
        limitations under Brazilian foreign investment legislation. See “Key
        Information—Exchange Rate Information—Exchange Controls” and “Additional
        Information—Memorandum and Articles of Association—Restrictions on Foreign
        Investment”.
  **Additional
        Information**
  **MEMORANDUM
        AND ARTICLES OF ASSOCIATION**
  Set
        forth below is a brief summary of the material provisions concerning our
        preferred shares, common shares, bylaws and the Brazilian Corporate Law.
        In
        Brazil, the principal governing document of a corporation is the company’s
        bylaws (“ *Estatuto
        Social* ”).
        This
        description is qualified in its entirety by reference to Brazilian Corporate
        Law
        and our bylaws. An English translation of our bylaws has been filed with
        the SEC
        as an exhibit to this annual report. A copy of our bylaws (together with
        an
        English translation) is also available for inspection at the principal office
        of
        the Depositary. Information on the trading market for our preferred shares
        is
        set forth under “The Offer and Listing—Principal Market and Trading Market Price
        Information” and information on ownership of our shares is set forth under
“Major Shareholders and Related Party Transactions—Major
        Shareholders”.
  Our
        capital stock is comprised of preferred shares and common shares, all without
        par value. At May 31, 2006, there were 31,384,324,044 total preferred shares
        (“ *ações
        preferenciais* ”)
        outstanding and 34,508,111,051  total common shares (“ *ações
        ordinárias* ”)
        outstanding. We are authorized to increase our capital upon the decision
        of our
        Board of Directors, without the need to amend our bylaws, up to 70,000,000,000
        shares. There are no other classes or series of preferred shares
        outstanding.
  Each
        AmBev common share entitles the holder thereof to one vote at meetings of
        our
        shareholders. Holders of common shares are not entitled to any preference
        relating to our dividends or other distributions or any preference upon our
        liquidation.
  Each
        AmBev preferred share is non-voting, may not be converted into a common share,
        and is entitled to:
  (i)
              priority
                  in the reimbursement of capital in case of company’s liquidation;
                  and(ii)
              the
                  right to receive dividends in an amount per share at least 10%
                  higher than
                  the amount per share paid to holders of common
                  shares.
  See
        “Voting Rights” for more information regarding the voting rights of our
        preferred shares.
  Although
        Law No. 10,303/01 has amended the Brazilian Corporate Law to establish that
        the
        number of non-voting shares or shares with limited voting rights, such as
        our
        preferred shares, may not exceed half (50%) of the total number of issued
        shares, since AmBev has been incorporated prior to the enactment of Law No.
        10,303/01, it is allowed by law to keep the existing proportion between
        common shares and preferred shares - i.e., the number of its non-voting shares
        may not exceed two-thirds of the total number of its shares.
  101
 The
          members of our Board of Directors are elected by the controlling shareholders
          of
          our common shares. Board members, regardless of the shareholder they represent,
          owe fiduciary duties towards the Company and all of its shareholders. At
          the
          same time, any director appointed by shareholders bound by a shareholders’
agreement is also bound by the terms of such agreement. For further information
          on this matter see “Major Shareholders and Related Party Transactions—Major
          Shareholders—AmBev Shareholders’ Agreement”.
  **General**
  Our
          registered name is Companhia de Bebidas das Américas - AmBev and our registered
          office is in São Paulo, SP, Brazil. Our registration number with the São Paulo
          Commercial Registry is 35,300,157,770. AmBev’s principal corporate purposes
          include the production and sale of beer, soft drinks and other beverages.
          A more
          detailed description of AmBev’s purposes can be found in Chapter I, Article 3 of
          AmBev’s bylaws.
  **Board
          of Directors**
  In
          accordance with the Brazilian Corporate Law, any matters subject to the
          approval
          of our Board of Directors can be approved by the affirmative vote of a
          majority
          of our Board members present at the relevant meeting, except as provided
          in
          AmBev’s Shareholders’ Agreement.
  According
          to the general principles of the Brazilian Corporate Law, if a director
          or an
          executive officer has a conflict of interest with the company in connection
          with
          any proposed transaction, the director or executive officer may not vote
          in any
          decision of the Board of Directors or of the board of executive officers
          regarding such transaction and must disclose the nature and extent of the
          conflicting interest for transcription in the minutes of the meeting. In
          any
          case, a director or an executive officer may not transact any business
          with the
          company, including any borrowings, except on reasonable or fair terms and
          conditions that are identical to the terms and conditions prevailing in
          the
          market or offered by third parties. Any transaction in which a director
          may have
          an interest can only be approved if carried out on an arm’s-length
          basis.
  Our
          bylaws and the Brazilian Corporate Law require that our directors be
          shareholders of the Company. Ownership of one share is sufficient to satisfy
          this condition.
  **Dividends
          and Reserves**
  The
          discussion below summarizes the main provisions of the Brazilian Corporate
          Law
          regarding the establishment of reserves by corporations and rules with
          respect
          to the distribution of dividends, including provisions regarding the interest
          attributable to shareholders’ equity.
  ***Calculation
          of Distributable Amounts***
  At
          each Annual Shareholders’ meeting, AmBev’s Board of Directors is required to
          propose how the Company’s net earnings for the preceding fiscal year are to be
          allocated. For purposes of Brazilian Corporate Law, a company’s net income after
          income taxes and social contribution taxes for such fiscal year, net of
          any
          accumulated losses from prior fiscal years and amounts allocated to employees’
and management’s participation in earnings represents its “adjusted income” for
          such fiscal year. In accordance with the Brazilian Corporate Law, an amount
          equal to such “adjusted income” (which we will refer to as the “distributable
          amount”) will be available for distribution to shareholders in any particular
          year. Such distributable amount is subject to:
  ·
                Reductions
                    that may be caused by amounts contributed for the purpose of
                    meeting the
                    charges of the assistance foundation for employees and management
                    of the
                    Company and its controlled companies, with due regard for the
                    rules
                    established by the Board of Directors to this effect. Up to 10%
                    of the
                    distributable amount may be contributed under this
                    concept.·
                Reductions
                    caused by amounts allocated to the “Legal Reserve” or contingency
                    reserves. See “—Reserves”.·
                Increases
                    caused by reversals of reserves constituted in prior
                    years.
  102
  ***Mandatory
          Dividend***
  AmBev
          is required by its bylaws to distribute to shareholders as dividends in
          respect
          to each fiscal year ending on December 31 an amount not less than 35% of
          the
          distributable amount (mandatory dividend). In addition to the mandatory
          dividend, the Board of Directors may recommend payment of additional dividends
          to shareholders. The limit for dividend payment is the distributable amount
          plus
          the balance available in our statutory “Investment Reserve”, to which we
          allocate distributable amounts from previous fiscal years not paid as dividends.
          See “—Reserves”. Furthermore, dividend payments may be implemented in advance,
          during the fiscal year to which it is related, upon the decision of the
          Board of
          Directors. Any amount paid as a dividend in advance will be considered
          by the
          end of the fiscal year as part of the mandatory dividend owed to
          shareholders.
  In
          addition, the mandatory dividend, either the full amount or a portion of
          it, may
          not be paid in any given year should the Board of Directors consider that
          such
          payment is incompatible with the company’s financial situation, subject to
          shareholders approval. While the law does not establish the circumstances
          in
          which payment of the mandatory dividend is “incompatible” with a company’s
          financial situation, it is generally agreed that a company is allowed not
          to pay
          the mandatory dividend if such payment threatens the existence of the company
          as
          a going concern or harms its normal course of operations. The Company’s *Conselho
          Fiscal* must
          opine on the non-payment of mandatory dividends, and AmBev’s administration is
          supposed to provide to the CVM, no later than five business days after
          such a
          decision is taken, a report explaining the reasons considered by the Board
          of
          Directors.
  Any
          postponed payment of mandatory dividends must be allocated as a special
          reserve.
          Any remaining balance of such reserve not absorbed by losses in subsequent
          fiscal years must be paid to shareholders as soon as the Company’s financial
          situation allows.
  ***Dividend
          Preference of Preferred Shares***
  Pursuant
          to AmBev’s bylaws, AmBev’s preferred shares, if any, are entitled to dividends
          10% greater than the dividends to be paid to AmBev’s common shares.
  ***Payment
          of Dividends***
  Under
          Brazilian Corporate Law any holder of record of shares at the time of a
          dividend
          declaration is entitled to receive dividends, which are generally required
          to be
          paid within 60 days following the date of such declaration, unless a
          shareholders’ resolution sets forth another date of payment, which, in either
          case, must occur prior to the end of the fiscal year in which such dividends
          were declared. AmBev’s bylaws do not provide for a time frame for payment of
          dividends. The mandatory dividend is satisfied through payments made in
          the form
          of dividends and interest attributable to shareholders’ equity, which is
          equivalent, from an economic perspective, to a dividend, but is usually
          a tax
          maximizing way to distribute earnings to our shareholders, as it is generally
          deductible for income tax purposes (see “—Interest Attributable to Shareholders’
Equity”). Shareholders have a three-year period from the dividend payment date
          to claim the payment of dividends, after which the Company has no liability
          for
          such payment.
  Shareholders
          who are not residents of Brazil must register their investment with the
          Central
          Bank in order for dividends, sales proceeds or other amounts to be eligible
          for
          remittance in foreign currency outside of Brazil. The preferred and common
          shares underlying our ADSs are held in Brazil by the custodian, Banco Itaú S.A.,
          as agent for the depositary (The Bank of New York), which is the registered
          owner of such AmBev shares. Payments of cash dividends and distributions,
          if
          any, on AmBev common and preferred shares will be made in Brazilian *reais* to the
          custodian on behalf of the depositary. The custodian will then convert
          such
          proceeds into U.S. dollars and will deliver such U.S. dollars to the depositary
          for distribution to the holders of AmBev ADSs. In the event that the custodian
          is unable to immediately convert the dividends in *reais* into
          U.S. dollars, holders of the preferred and common AmBev ADSs may be adversely
          affected by devaluations or other exchange rate fluctuations before such
          dividends can be converted and remitted. Fluctuations in the exchange rate
          between the *real* and the
          U.S. dollar may also affect the U.S. dollar equivalent of the *real* price of
          the preferred and common shares of AmBev on the Brazilian stock
          exchange.
  103
  ***Interest
          Attributable to Shareholders’ Equit*** *y*
  Since
          1996, Brazilian companies are permitted to distribute earnings to shareholders
          under the concept of interest attributable to shareholders’ equity. The amounts
          paid under this concept are generally deductible for AmBev’s income tax purposes
          and, as of the beginning of 1998, they also became deductible for social
          contribution purposes. The amount of any such notional “interest” payment to
          holders of equity securities is limited in respect of any particular year
          to the
          minimum of (a) 50% of retained earnings plus any statutory earnings reserve
          or
          (b) the company’s shareholder’s equity multiplied by the *Taxa
          de Juros de Longo Prazo* (“TJLP”), which is the official interest rate used as reference in long-term
          loans provided by the BNDES.
  Interest
          attributable to shareholders’ equity is treated exactly as dividends for
          purposes of income distribution. The only significant difference is that
          a 15%
          withholding tax is due by non-exempt shareholders upon receipt of such
          interest
          payment, which tax is collected by the company on behalf of its shareholders
          when the distribution is implemented.
  The
          net amount shareholders receive as interest attributable to shareholders’ equity
          is deducted from the mandatory dividend owed to shareholders.
  ***Reserves***
  *General*
  Brazilian
          Corporate Law provides that all discretionary allocations of “adjusted income”,
          including the Unrealized Income Reserve and the Investment Reserve, are
          subject
          to approval by shareholders and may be added to capital or distributed
          as
          dividends in subsequent years. In the case of Tax Incentive Reserve and
          the
          Legal Reserve, they are also subject to shareholders’ approval; however, the use
          of their respective balances is restricted to being added to capital or
          the
          absorption of losses. They cannot be used as a source for income distribution
          to
          shareholders.
  *Legal
          Reserve*
  Under
          Brazilian Corporate Law, corporations are required to maintain a “Legal Reserve”
to which they must allocate 5% of their “adjusted income” for each fiscal year
          until the balance of the reserve equals 20% of their paid-in capital.
          Accumulated losses, if any, may be charged against the Legal Reserve. Other
          than
          that, the Legal Reserve can only be used to increase a company’s
          capital.
  *Contingency
          Reserve*
  Under
          the Brazilian Corporate Law, a portion of our “adjusted income” may also be
          discretionally allocated to a “contingency reserve” for an anticipated loss that
          is deemed probable in future years. Any amount so allocated in a prior
          year must
          be either reversed in the fiscal year in which the loss was anticipated
          if such
          loss does not in fact occur or is not charged off in the event that the
          anticipated loss occurs.
  *Investment
          Reserve*
  Under
          Brazilian Corporate Law, a portion of a corporation’s “adjusted income” may be
          allocated for discretionary appropriations for plant expansion and other
          fixed
          or working capital investment projects, including share buyback programs.
          The
          amounts appropriated in such reserves are based on a capital budget previously
          presented by management and approved by shareholders.
 
 104
  Pursuant
          to the Brazilian Corporate Law, the Investment Reserve balance is not allowed
          to
          be greater than a company’s capital. In the case such limit is reached,
          shareholders may vote for the amount in excess to be converted into capital
          or
          distributed as dividends.
  *Unrealized
          Income Reserve*
  As
          of March 1, 2002, under Law No. 10,313, which amended the Brazilian Corporate
          Law, the amount by which the mandatory dividend exceeds the “realized” portion
          of net profits for any particular year may be allocated to the unrealized
          income
          reserve. The “realized” portion of net profits is the amount by which “adjusted
          income” exceeds the sum of:
  (i)
                our
                    net positive results, if any, from the equity method of accounting
                    for
                    earnings and losses of our subsidiaries and certain affiliates;
                    and(ii)
                the
                    profits, gains or return obtained on transactions to be completed
                    after
                    the end of the following fiscal
                    year.
  *Tax
          Incentive Reserve*
  Under
          Brazilian tax laws, a portion of “adjusted income” may also be allocated to a
          general “tax incentive reserve” in amounts corresponding to reductions in a
          company’s income tax generated by credits for particular government-approved
          investments. The reserve is available only in connection with the acquisition
          of
          capital stock of companies undertaking specific government-approved projects.
  **Voting
          Rights**
  Each
          common share entitles its holder to one vote at AmBev’s shareholders' meetings.
          Holders of preferred shares are not ordinarily entitled to vote at AmBev’s
          shareholders’ meetings.
  Brazilian
          Corporate Law provides that non-voting preferred shares entitled to receive
          minimum or fixed dividends acquire full voting rights in the event that
          a
          company fails to pay the minimum or fixed dividends to which such shares
          are
          entitled for the period established by such company’s bylaws, which may not
          exceed three consecutive fiscal years. Such voting rights continue until
          payment
          of dividends is resumed (or until all dividends due are paid, in the case
          of
          preferred shares with the right to receive dividends cumulatively). The
          same
          rule applies to preferred shares with restricted voting rights, causing
          the
          suspension of the restrictions in place. The existing preferred shares
          of AmBev
          will not acquire such voting rights as AmBev preferred shares are not entitled
          to receive minimum or fixed dividends.
  **Election
          of Directors**
  Each
          common share of AmBev represents one vote at any shareholders’ meeting in
          connection with the election of the Board of Directors of AmBev. Minority
          common
          shareholders holding at least 15% of voting capital or preferred shareholders
          holding at least 10% of total capital may each elect one member of the
          Board of
          Directors and its alternate member. Additionally, if such shareholders
          do not
          achieve such percentage, they can jointly appoint one member of the Board
          of
          Directors and its alternate member once they represent, together, at least
          10%
          of total capital. In order to exercise these minority rights, shareholders
          must
          prove that they have held the shares for at least the last three months.
  If
          such prerogative is exercised with the adoption of a cumulative voting
          procedure, the controlling shareholder will always have the right to elect
          the
          same number of members appointed by minority shareholders plus one,
          independently of the number of directors provided in the Company’s
          bylaws.
  Shareholders
          holding shares representing at least 10% of the shares entitled to vote
          in the
          shareholders’ meeting, or such smaller percentage applicable according to a
          sliding scale determined by the CVM and based on the capital of the company
          (5%
          of the voting shares, in the case of AmBev), have the right to request
          that a
          cumulative voting procedure be adopted. Under such procedure, each voting
          share
          shall have as many votes as there are positions of directors to be filled,
          and
          each shareholder may cast all the votes for a single candidate or distribute
          them among various candidates.
  105
  Under
          the bylaws of AmBev and applicable law, the number of directors may be
          reduced
          to a minimum of three. Because the AmBev shareholders’ agreement provides that,
          as long as FAHZ maintains a minimum shareholding in AmBev, FAHZ shall have
          the
          right to appoint four members of the Board of Directors, any reduction
          in the
          number of such members to fewer than four would be subject to FAHZ’s
          approval.
  **Liquidation**
  In
          the event of liquidation, a general shareholders' meeting shall determine
          the
          form of liquidation and appoint a committee to supervise the process during
          the
          liquidation period. A liquidator will be appointed by the Board of Directors.
  Upon
          liquidation, the AmBev preferred shares have an absolute preference over
          the
          AmBev common shares. In the event of a liquidation, the assets available
          for
          distribution to AmBev’s shareholders would be distributed first to the preferred
          shareholders in an amount equal to their pro rata share of the legal capital
          of
          the Company (AmBev’s current bylaws state that its capital is R$ 5,691,369),
          prior to making any distributions to AmBev’s common shareholders. In the event
          that the assets to be so distributed are insufficient to fully compensate
          AmBev’s preferred shareholders, the preferred shareholders would each receive
          a
          pro rata amount (based on their pro rata share of the legal capital of
          the
          Company excluding the common shares in such calculation) of any available
          assets.
  Although
          FAHZ’s net assets are included for the purposes of U.S. GAAP, in the event of
          liquidation the creditors of AmBev would not have access to the assets
          of
          FAHZ.
  **Shareholders’
          Meeting**
  A
          general meeting is convened by publishing, no later than 15 days prior
          to the
          scheduled meeting date and no fewer than three times, a notice in the *Diário
          Oficial do Estado de São Paulo* and in a
          newspaper with general circulation in São Paulo, where AmBev has its registered
          office. The shareholders of AmBev have previously designated a local newspaper
          in the city of São Paulo for this purpose. Such notice must contain the agenda
          for the meeting.
  A
          general meeting may be held if shareholders representing at least one-quarter
          of
          the voting shares are present, except in some cases provided for by law,
          such as
          for the alteration of a company’s bylaws, which requires the presence of
          shareholders representing at least two-thirds of the voting shares. If
          no such
          quorum is present, eight-day prior notice must be given in the same manner
          as
          described above, and a meeting may then be convened without any specific
          quorum
          requirement, subject to the minimum quorum and voting requirements for
          specific
          matters, as discussed below. Shareholders without voting rights may attend
          a
          general meeting and take part in the discussion of matters submitted for
          consideration.
  Except
          as otherwise provided by law, resolutions of a general meeting are passed
          by a
          simple majority vote of the shares present or represented at the meeting,
          abstentions not being taken into account. Under Brazilian Corporate Law,
          the
          approval of shareholders representing at least a majority of the issued
          and
          outstanding voting shares is required for the types of actions described
          below,
          as well as, in the case of items (a) and (b), the approval of shareholders
          representing a majority of the issued and outstanding preferred shares
          of the
          harmed class in a separate special meeting held no later than one year
          after the
          resolution is approved:
  (a)
                creating
                    preferred shares or increasing disproportionately an existing
                    class of
                    preferred shares relative to the other classes of shares, unless
                    such
                    action is provided for or authorized by the bylaws;(b)
                modifying
                    a preference, privilege or condition of redemption or amortization
                    conferred on one or more classes of preferred shares, or creating
                    a new
                    class with greater privileges than those of the existing classes
                    of
                    preferred shares;
  106
  (c)
                reducing
                    the mandatory dividend;(d)
                merging
                    AmBev with another company or consolidating or splitting
                    it;(e)
                participating
                    in a centralized group of companies as defined under Brazilian Corporate
                    Law;(f)
                changing
                    the corporate objectives of AmBev;(g)
                creating
                    founders’ shares; and(h)
                dissolving
                    AmBev or ceasing its liquidation
                    status.
  General
          meetings can be called by the Board of Directors of AmBev. Under the Brazilian
          Corporate Law, meetings can also be convened by AmBev’s shareholders as follows:
          (i) by any shareholder if, under certain circumstances set forth in the
          Brazilian Corporate Law, the directors take more than 60 days to convene
          a
          general shareholders’ meeting; (ii) by shareholders holding at least 5% of
          AmBev’s total capital stock if, after a period of eight days, the directors fail
          to call a general shareholders’ meeting that has been justifiably requested by
          such shareholders; and (iii) by shareholders holding at least 5% of either
          AmBev’s voting capital stock or AmBev’s non-voting capital stock if, after a
          period of eight days, the directors fail to call a general meeting for
          the
          purpose of installing a *Conselho
          Fiscal* that has
          been requested by such shareholders. Additionally, under certain circumstances
          set forth in the Brazilian Corporate Law, meetings can also be convened
          by
          AmBev’s *Conselho
          Fiscal* .
          For
          further information regarding AmBev’s *Conselho
          Fiscal* ,
          see
“Directors, Senior Management and Employees—Directors—Board
          Practices”.
  A
          shareholder may be represented at a general meeting by an attorney-in-fact
          appointed no more than one year before the meeting, who must be a shareholder,
          a
          company officer or a lawyer. For a public company such as AmBev, the
          attorney-in-fact may also be a financial institution.
  Shareholders
          may not exercise voting rights whenever they are contributing assets in
          a
          capital increase paid in kind or with respect to the approval of their
          own
          accounts, as well as in those resolutions that may favor such shareholders
          specifically, or whenever there is a conflicting interest with the company.
          Mergers between affiliated parties are subject to a special statutory valuation
          procedure intended to determine whether the exchange ratio is adequate
          for all
          the parties involved, without preventing the approval of the resolution
          for lack
          of the statutory quorum.
  **Restrictions
          on Foreign Investment**
  There
          are no restrictions on ownership or voting rights in respect of capital
          stock of
          AmBev owned by individuals or legal entities domiciled outside Brazil.
          For a
          description of voting rights, see “—Voting Rights”. The right to convert
          dividend (including interest attributable to shareholders’ equity) payments and
          proceeds from the sale of preferred or common shares into foreign currency
          and
          to remit such amounts outside Brazil, however, is subject to exchange control
          restrictions and foreign investment legislation. For a description of these
          exchange control restrictions and foreign investment legislation, see “Key
          Information—Exchange Rate Information—Exchange Controls”.
  **Withdrawal
          Rights**
  Under
          Brazilian Corporate Law, a dissenting shareholder has the right to withdraw
          from
          AmBev and be reimbursed for the value of the common or preferred shares
          held,
          whenever a decision is taken at a shareholders’ meeting by a qualified quorum of
          shareholders representing at least 50% of the total outstanding voting
          capital
          to:
  ·
                create
                    preferred shares or increase disproportionately an existing class
                    of
                    preferred shares relative to the other classes of shares, unless
                    such
                    action is provided for or authorized by AmBev’s
                    bylaws;
  107
  ·
                modify
                    a preference, privilege or condition of redemption or amortization
                    conferred on one or more classes of preferred shares, or create
                    a new
                    class with greater privileges than the existing classes of preferred
                    shares;·
                reduce
                    the mandatory dividend;·
                merge
                    or consolidate AmBev with another company;·
                participate
                    in a centralized group of companies (as defined by the Brazilian
                    Corporate
                    Law);·
                change
                    the corporate objectives of AmBev;·
                split
                    AmBev, if the new entities resulting from the split have different
                    principal corporate objectives, a lower minimum mandatory dividend
                    or
                    participate in a centralized group of companies;·
                transform
                    AmBev into another corporate type;·
                transform
                    AmBev into a wholly owned subsidiary of another company;
                    or·
                approve
                    the acquisition of another company, the price of which exceeds
                    the limits
                    set forth in Brazilian Corporate
                    Law.
  Furthermore,
          if a governmental entity acquires control of AmBev through expropriation
          of
          shares, shareholders will have the right to withdraw from AmBev and be
          reimbursed for the value of the shareholders’ equity attributable to their
          equity interest.
  The
          withdrawal rights lapse 30 days after publication of the minutes of the
          relevant
          shareholders’ meeting in the Brazilian press. AmBev would be entitled to
          reconsider any action triggering withdrawal rights within 10 days following
          the
          expiration of such rights if the redemption of shares of dissenting shareholders
          would jeopardize the financial stability of AmBev. Shares to be purchased
          by
          AmBev from the dissenting shareholders exercising withdrawal rights will
          be
          valued at an amount equal to the ratable portion attributable to such shares
          of
          the shareholders’ equity of AmBev as shown on the last balance sheet approved at
          a general meeting of the shareholders (book value). However, if more than
          60
          days have elapsed since the date of such balance sheet, dissenting shareholders
          may require that the value of their shares be calculated on the basis of
          a new
          balance sheet. As a general rule, shareholders who acquire their shares
          after
          the first notice convening the shareholders’ meeting or after the relevant press
          release concerning the meeting are published will not be entitled to withdrawal
          rights.
  **Preemptive
          Rights**
  Each
          shareholder of AmBev generally has a preemptive right to subscribe for
          shares in
          capital increases (including in the issuance of stock purchase warrants
          or
          convertible bonds) in proportion to its shareholdings. A minimum period
          of 30
          days following the publication of notice of the capital increase is allowed
          for
          the exercise of the right, and the right is negotiable. In the event of
          a
          capital increase which would maintain or increase the proportion of capital
          represented by preferred or common shares, holders of preferred ADSs or
          common
          ADSs, as the case may be, would have preemptive rights to subscribe only
          to
          newly issued preferred shares or common shares, as applicable. In the event
          of a
          capital increase which would reduce the proportion of capital represented
          by
          preferred shares or common shares, holders of preferred ADSs or common
          ADSs, as
          the case may be, would have preemptive rights to subscribe for common shares
          or
          preferred shares, as applicable, in proportion to their shareholdings only
          to
          the extent necessary to prevent dilution of their interest in AmBev. AmBev’s
          bylaws provide that if our Board of Directors decides to increase our share
          capital within the limit of our authorized capital through sale in stock
          exchanges, public offerings or public tender offers, no preemptive rights
          apply.
          In addition, Brazilian law provides that the grant or the exercise of stock
          options pursuant to certain stock option plans, such as our stock ownership
          plan, is not subject to preemptive rights.
  108
  **Form
          and Transfer**
  Brazilian
          law provides that ownership of shares of capital stock of a Brazilian
          corporation shall generally be evidenced only by a record of ownership
          maintained by either the corporation or an accredited intermediary, such
          as a
          bank, acting as a registrar for the shares. Banco Itaú S.A. currently maintains
          AmBev’s share ownership records.
  Because
          the preferred shares and common shares of AmBev are in registered book-entry
          form, a transfer of such preferred and common shares is made under the
          rules of
          the Brazilian Corporate Law, which provides that a transfer of shares is
          effected by an entry made by the registrar for AmBev’s shares in its books, by
          debiting the share account of the transferor and crediting the share account
          of
          the transferee.
  Transfers
          of preferred and common shares by a foreign investor are made in the same
          way
          and executed by such investor’s local agent on the investor’s behalf except
          that, if the original investment was registered with the Central Bank pursuant
          to the foreign investment regulations, the foreign investor should also
          seek
          amendment, if necessary, through its local agent, of the corresponding
          electronic registration to reflect the new ownership.
  The
          Bovespa operates a central clearing system. A holder of our shares may
          choose,
          at its discretion, to participate in this system, and all shares elected
          to be
          put into the system will be deposited in custody with the stock exchange
          (through a Brazilian institution that is duly authorized to operate by
          the
          Central Bank and maintains a clearing account with the stock exchange).
          The fact
          that these shares are subject to custody with the stock exchange will be
          reflected in our registry of shareholders. Each participating shareholder
          will,
          in turn, be registered in our register of beneficial shareholders maintained
          by
          the stock exchange and will be treated in the same way as registered
          shareholders.
  **Disclosure
          of Principal Shareholders**
  Under
          Brazilian law, shareholders owning more than ten percent of a company’s voting
          shares, such as the holders of AmBev’s common shares, must publicly disclose
          their shareholder ownership.
  **Other
          Significant Provisions of Brazilian Corporate Law**
  Brazilian
          Corporate Law also requires the following:
  ·
                upon
                    a sale of control, the acquiror is required to launch a tender
                    offer to
                    purchase all minority voting shares at a price equal to at least
                    80% of
                    the price per share paid for the controlling stake;·
                if
                    provided for in the bylaws, disputes among our shareholders will
                    be
                    subject to arbitration. Our bylaws currently do not provide for
                    arbitration;·
                de-listing
                    of a public company is subject to an administrative proceeding
                    before the
                    CVM, having as a condition the conduction of a tender offer by
                    the
                    controlling shareholder or the corporation itself for the acquisition
                    of
                    all outstanding shares (defined as those owned by shareholders
                    other than
                    the controlling shareholder, officers and directors) at a fair
                    price, as
                    determined by an independent appraiser. Shareholders holding
                    more than
                    two-thirds of the free float of shares must accept the tender
                    offer or
                    must expressly agree with the de-listing (for this purpose, the
                    free float
                    of shares must be considered those held by shareholders that
                    have either
                    accepted the de-listing or the offer);·
                in
                    addition, if a controlling shareholder or group of controlling
                    shareholders acquires additional shares in excess of one-third
                    of the free
                    float of shares in any class, a mandatory tender offer is required
                    for all
                    the outstanding shares in that class. The same requirement applies
                    whenever (i) a shareholder or group of shareholders representing
                    the same
                    interest, and holding more than 50% of the shares in any class
                    from 7
                    March 2002 (when CVM’s Normative Ruling No. 361 became effective, except
                    for public companies existing in September 5, 2000, in which
                    case this
                    initial date will prevail), acquires a further interest of 10%
                    or more of
                    that same class of shares within a 12-month period; and (ii)
                    the CVM
                    determines, within six months after being informed, that the
                    acquisition
                    restricts the liquidity of the
                    shares;
  109
 
 ·
                upon
                    the occurrence of a tender offer aiming at delisting the Company
                    or
                    through which our controlling shareholders acquire more than
                    one-third of
                    the free float shares, the purchase price shall be equal to the
                    fair value
                    of the shares considering the total number of outstanding
                    shares;·
                members
                    of our Board of Directors elected by the non-controlling shareholders
                    have
                    the right to veto the choice of the independent accountant by
                    the
                    controlling shareholder;·
                our
                    controlling shareholders, the shareholders that elect members
                    to our Board
                    of Directors and to the*Conselho
                    Fiscal*,
                    the members of our Board of Directors and*Conselho
                    Fiscal*and our executive officers are required to disclose any purchase
                    or sale
                    of our shares to the CVM and to the São Paulo Stock Exchange;
                    and·
                the
                    chairman of any shareholders’ or Board of Directors’ meeting shall
                    disregard any vote that is rendered against provisions of any
                    shareholders’ agreement if that shareholders’ agreement has been duly
                    filed with us. The AmBev Shareholders’ Agreement has been duly filed with
                    us.
  **MATERIAL
          CONTRACTS**
  The
          following is a summary of the material contracts to which we are a party.
  **Shareholders’
          Agreement**
  The
          agreement between the shareholders of Brahma and Antarctica to form AmBev,
          including the amendments inserted in connection with the transaction between,
          among others, AmBev and InBev, and the other amendments is discussed in
“Major
          Shareholders Related and Party Transactions—Major Shareholders—AmBev
          Shareholders’ Agreement.”
  **Governance
          Agreement**
  The
          agreement relating to the governance of AmBev entered into between FAHZ,
          InBev
          Brasil, ECAP, AmBev and BAC pursuant to the stock purchase agreement between
          AmBev and BAC is discussed in “Major Shareholders and Related Party
          Transactions—Major Shareholders—AmBev Share Transfer Agreement and AmBev
          Governance Agreement”. This agreement was terminated on August 8, 2006 in
          connection with the closing of the acquisition by AmBev of BAC’s remaining
          shares in Quinsa.
  **Acquisitions,
          Dispositions and Joint Ventures**
  We
          have discussed the details of some material acquisitions and agreements
          related
          thereto in “Information on the Company—InBev-AmBev Transactions” and
“Information on the Company—Interest in Quinsa”. In addition, we are a party to
          the following material acquisitions, dispositions and joint ventures:
  ***Pepsi***
  In
          1997, we acquired Pepsi-Cola Engarrafadora Ltda. and PCE Bebidas Ltda.,
          PepsiCo
          bottlers in southern and southeastern Brazil, and at the same time acquired
          the
          exclusive rights to produce, sell and distribute Pepsi soft drink products
          in
          northeastern Brazil. In 1999, we obtained the exclusive rights to produce,
          sell
          and distribute Pepsi soft drink products throughout Brazil. On October
          9, 2000,
          following the combination, we entered into a new franchise agreement with
          PepsiCo which terminated the Brahma franchise agreement and granted us
          sole
          bottler and distributor rights for Pepsi soft drink products in Brazil.
          On
          January 1, 2002, we expanded our partnership with PepsiCo to include the
          production, sale and distribution of *Gatorade* .
          The *Gatorade* agreement has been submitted for CADE’s review. CADE has approved the
          transaction with certain restrictions, including the sale of the trademark *Marathon* .
          See
“Consolidated Financial Statements and Other Financial Information—Legal
          Proceedings—Joint Ventures and Alliances”. Our PepsiCo franchise agreement
          expires in 2017, and, thereafter, will be automatically renewed for additional
          ten-year terms absent two years’ prior notice by either party of its intent not
          to renew the contract following the expiration of the initial or any subsequent
          term.
  110
  On
          October 14, 2003, by acquiring certain assets of Embotelladora Rivera,
          AmBev
          became PepsiCo’s exclusive bottler for northern Peru and Lima. See “Material
          Contracts - Acquisitions, Dispositions and Joint Ventures - Compañia Cervecera
          AmBev Peru S.A.C.”
  On
          February 12, 2004, we announced an alliance with Embodom, a Pepsi bottler
          in the
          Dominican Republic. See “Additional Information - Material Contracts -
          Acquisitions, Dispositions and Joint Ventures - Embodom”
  ***Industrias
          Del Atlántico***
  AmBev
          completed the construction of a brewery in Guatemala in partnership with
          CabCorp, the main Pepsi bottler in Central America. Operations began in
          August
          2003. Equipment for the Guatemala plant was transferred from our other
          facilities in Brazil due to the overcapacity resulting from the Brahma
          and
          Antarctica merger. On October 24, 2002, AmBev and CabCorp entered into
          a joint
          venture agreement, setting forth rights and obligations for the creation
          of a
          strategic regional alliance to collaborate in, among other things, the
          production, importation, distribution, marketing and sale of AmBev’s products,
          especially beer, in Guatemala and other Central American countries. On
          August
          12, 2003, Monthiers S.A. (“Monthiers”), an indirect subsidiary of AmBev,
          subscribed for 573,092 shares of common stock of Industrias Del Atlántico S.A.
          (“IDA”), a Guatemalan company formerly controlled by CabCorp, representing 50%
          plus one share of the outstanding issued and outstanding common stock of
          IDA. As
          consideration, Monthiers contributed to IDA U.S.$7.2 million in debt of
          IDA
          relating to credits that CBB held against IDA in connection with the import
          by
          IDA of certain goods and equipment from CBB that had been transferred to
          Monthiers. IDA produces beer in Guatemala under the trade name of
          AmBevCentroAmerica.
  ***Compañia
          Cervecera AmBev Peru S.A.C.***
  On
          February 19, 2003, we announced our decision to enter into the Peruvian
          beer
          market through the construction of a production facility and a distribution
          network. Our new plant, located in the Lima metropolitan region, was completed
          in May, 2005.
  On
          October 31, 2003, through our subsidiary Compañia Cervecera AmBev Peru S.A.C
          (“AmBev Peru”), AmBev acquired certain assets of Embotelladora Rivera in Peru
          for approximately R$ 86.7 million. These assets include two soft drinks
          plants,
          which combined have an estimated production capacity of 6.3 million hectoliters
          per year, and other sales and distribution assets in Lima. Contemporaneously
          with this acquisition, AmBev became PepsiCo’s exclusive bottler for northern
          Peru and Lima.
  In
          July 2006, Ransa Comercial S.A., a company that is part of the Romero business
          group (“Romero Group”), purchased a 25% interest in AmBevPerú for an amount of
          approximately US$ 3.7 million. This transaction is aimed to enable AmBev
          to
          benefit from the local know-how of a strategic partner for the Peruvian
          market
          such as the Romero Group, thus strengthening AmBevPerú’s
          operations.
  ***Cerveceria
          Suramericana***
  In
          December 2003, we acquired 80% of the capital of Cerveceria Suramericana,
          currently AmBev Ecuador, the second largest brewer in Ecuador, for approximately
          R$ 105.6 million. Through its *Biela* brand,
          AmBev Ecuador currently holds approximately 7.0% of the Ecuadorian beer
          market,
          according to our estimates. In October 2004, *Biela* brand
          was discontinued and we launched the *Brahma* brand in
          Ecuador.
  ***Embodom***
  On
          February 12, 2004, we announced an alliance with Embodom, a Pepsi bottler
          in the
          Dominican Republic, in order to jointly produce and market beer and soft
          drinks
          in the Dominican Republic. AmBev agreed to pay R$ 204.9 million for 51%
          of
          Embodom’s total capital. AmBev’s stake reached 66.0% by the end of 2005 through
          an asset contribution to Embodom consisting of U.S.$10 million and a brewing
          facility in the region of Santo Domingo, which started operations in August
          2005.
  111
  ***Quinsa***
  On
          August 8, 2006 AmBev announced that it had acquired from BAC all the remaining
          shares in Quinsa for a total purchase price of approximately US$1.25 billion.
          The acquisition was financed through a combination of cash flow and the
          issuance
          of debt in the local market. As a result of the transaction, AmBev’s equity
          interest in Quinsa increased from 56.72% to 91.18% of its total share capital.
          See “Information on the Company—History and Development of the Company—Interest
          in Quinsa”.
  **The
          Antitrust Performance Agreement**
  We
          are currently subject to one antitrust performance agreement in effect.
          See
“Financial Information—Consolidated Financial Statements and Other Financial
          Information—Legal Proceedings”. This agreement was signed with CADE in Brazil
          and relates to the Brahma and Antarctica combination.
  **The
          Conditional Approval of our Deal with Quinsa**
  The
          completion of our deal with Quinsa required the approval of the CNDC, the
          Argentinean antitrust agency. The approval was obtained in January 2003
          subject
          to the accomplishment of some specific conditions. For further information
          on
          this matter see “—Information on the Company—History and Development of the
          Company—Interest in Quinsa”.
  **Debt
          Issuances**
  In
          December 2001, CBB issued U.S.$500 million 10.5% notes due December 2011
          in the
          U.S. securities markets, fully guaranteed by AmBev. This offering significantly
          increased the average maturity of AmBev outstanding debt. The transaction
          was
          priced at 98.56% of the nominal principal amount with a coupon rate of
          10.5%. On
          October 4, 2002, we consummated an SEC registered exchange offer. These
          notes
          contain certain covenants and events of default which, if triggered, may
          cause
          accelerated amortization.
  In
          September 2003, CBB issued U.S.$500 million 8.75% notes due September 2013
          in
          the U.S. securities markets, fully guaranteed by AmBev. The transaction
          was
          priced at 99.67% of the nominal principal amount with a coupon rate of
          8.75%.  We consummated an SEC registered exchange offer on September 15,
          2004. These notes contain certain covenants and events of default which,
          if
          triggered, may cause accelerated amortization.
  With
          the merger of CBB into AmBev in May 31, 2005, AmBev succeeded in all rights
          and
          obligations of CBB under the 2011 notes and the 2013 notes.
  On
          June 8, 2006, our Board of Directors approved a public issuance of debentures
          denominated in *reais* in the
          Brazilian market of up to R$2.6 billion. The issuance was registered with
          the
          CVM and its final amount was R$ 2,065,080,000. Proceeds of such issuance,
          which
          was closed on August 7, 2006, were used totally to finance the purchase
          of
          shares in Quinsa. See “History and Development of the Company —Interest on
          Quinsa” and “Capital Investment Program”.
  **License
          Agreements**
  We
          have a number of important license agreements, including (i) a cross-license
          agreement with InBev that allows us to exclusively produce, distribute
          and
          market the *Stella
          Artois* and *Beck’s* brands
          in most of Latin America, and allows InBev to exclusively produce, distribute
          and market the *Brahma* brand in
          Europe, Asia, Africa, Cuba and the United States, in addition to a license
          agreement among us and InBev and according to which we may distribute *Stella
          Artois* branded
          beer in Canada; (ii) several license agreements with PepsiCo that grants
          us the
          exclusive right to bottle, sell and distribute certain brands of PepsiCo’s
          portfolio of soft drinks in certain Latin American countries, including
          Brazil;
          and (iii) long-term licensing agreements with Anheuser-Busch that grant
          us the
          exclusive right to manufacture, package, sell, distribute and market some
          of
          Anheuser-Busch’s brands, including the *Budweiser* and *Bud
          Light* brands,
          in Canada. See “Information on the Company—Licenses”. See also, for the
          AmBev-InBev cross-license agreement, “Major Shareholders and Related Party
          Transactions—Material Related Party Transactions”, and for the license
          agreements with PepsiCo, “—Material Contracts—Acquisitions, Dispositions and
          Joint Ventures—Pepsi”.
  112
  Many
          states in Brazil offer tax benefits programs to attract investments to
          their
          regions. We participate in ICMS value-added tax credit programs offered
          by
          various Brazilian states which provide (1) tax credits to offset ICMS
          value-added tax payable and (2) ICMS deferrals. In return, we are committed
          to
          meeting certain operational requirements including, depending on the State,
          production volume and employment targets, among others. All of these conditions
          are included in specific agreements between AmBev and the governments.
          In the
          event that we do not meet the program’s targets, future benefits may be
          withdrawn. See “Operating and Financial Review and Prospects—Sales tax deferrals
          and other tax credits” and “Key Information—Risk Factors—The pending tax reform
          in Brazil may increase our tax burden”.
  **EXCHANGE
          CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS**
  There
          are no restrictions on ownership of our American Depositary Shares or capital
          stock by individuals or legal entities domiciled outside Brazil. However,
          the
          right to convert dividend payments and proceeds from the sale of preferred
          shares or common shares into foreign currency and to remit such amounts
          outside
          Brazil is subject to restrictions under foreign investment legislation
          which
          generally requires, among other things, that the relevant investment be
          registered with the Central Bank. These restrictions on the remittance
          of
          foreign capital abroad could hinder or prevent the custodian for the preferred
          shares or common shares represented by American Depositary Shares, or holders
          who have exchanged American Depositary Shares for preferred shares or common
          shares, from converting dividends, distributions or the proceeds from any
          sale
          of preferred shares or common shares, as the case may be, into U.S. dollars
          and
          remitting such U.S. dollars abroad. Delays in, or refusal to grant, any
          required
          government approval for conversions of Brazilian currency payments and
          remittances abroad of amounts owed to holders of American Depositary Shares
          could adversely affect holders of American Depositary Receipts.
  Under
          Resolution No. 2,689, foreign investors may invest in almost all financial
          assets and engage in almost all transactions available in the Brazilian
          financial and capital markets, provided that certain requirements are fulfilled.
          In accordance with Resolution No. 2,689, the definition of foreign investor
          includes individuals, legal entities, mutual funds and other collective
          investment entities, domiciled or headquartered abroad.
  Under
          Resolution No. 2,689, a foreign investor must:
  ·
                appoint
                    at least one representative in Brazil, with powers to perform
                    actions
                    relating to its investment;·
                appoint
                    an authorized custodian in Brazil for its investments;·
                complete
                    the appropriate foreign investor registration form;·
                register
                    as a foreign investor with the CVM; and·
                register
                    its foreign investment with the Central
                    Bank.
  Securities
          and other financial assets held by foreign investors pursuant to Resolution
          No.
          2,689 must be registered or maintained in deposit accounts or under the
          custody
          of an entity duly licensed by the Central Bank and the CVM. In addition,
          securities trading is restricted to transactions carried out on stock exchanges
          or through organized over-the-counter markets licensed by the CVM, except
          for
          subscription, share dividends, conversion of debentures into shares, securities
          indexes, purchase and sale of investment funds quotas and, if permitted
          by the
          CVM, going private transactions, canceling or suspension of trading. Moreover,
          the offshore transfer or assignment of the securities or other financial
          assets
          held by foreign investors pursuant to Resolution No. 2,689 are prohibited,
          except for transfers resulting from a corporate reorganization, or occurring
          upon the death of an investor by operation of law or will.
  Resolution
          No. 1,927 of the National Monetary Council, which is the restated and amended
          Annex V to Resolution No. 1,289, which we call the Annex V Regulations,
          provides
          for the issuance of depositary receipts in foreign markets in respect of
          shares
          of Brazilian issuers. It provides that the proceeds from the sale of American
          Depositary Shares by holders of American Depositary Receipts outside Brazil
          are
          free of Brazilian foreign investment controls and holders of American Depositary
          Shares who are not resident in a tax-haven jurisdiction, as defined below
          (see
“—Taxation”), will be entitled to favorable tax treatment. See “—Brazilian Tax
          Considerations” for more information on the Brazilian tax implications on the
          acquisition, ownership and disposition of our securities.
  113
  An
          electronic registration has been issued by the custodian in the name of
          The Bank
          of New York, the depositary, with respect to the American Depositary Shares.
          Pursuant to this electronic registration, the custodian and the depositary
          are
          able to convert dividends and other distributions with respect to the preferred
          shares or common shares represented by American Depositary Shares into
          foreign
          currency and to remit the proceeds outside Brazil. If a holder exchanges
          American Depositary Shares for preferred shares or common shares, the holder
          may
          continue to rely on the custodian’s electronic registration for only five
          business days after the exchange. After that, the holder must seek to obtain
          its
          own electronic registration with the Central Bank under Law No. 4,131 or
          Resolution No. 2,689. Thereafter, unless the holder has registered its
          investment with the Central Bank, such holder may not convert into foreign
          currency and remit outside Brazil the proceeds from the disposition of,
          or
          distributions with respect to, such preferred shares or common shares.
          A holder
          that obtains an electronic registration generally will be subject to less
          favorable Brazilian tax treatment than a holder of American Depositary
          Shares.
          See “—Taxation”.
  There
          were previously two foreign exchange markets in Brazil. Currently, with
          the
          enactment of National Monetary Council Resolution No. 3,265 of March 4,
          2005,
          the foreign exchange markets have been consolidated to form one exchange
          market.
          All transactions involving foreign currency in the Brazilian market, whether
          carried out by investors resident or domiciled in Brazil or investors resident
          or domiciled abroad, must now be conducted in such exchange market, through
          institutions authorized by the Central Bank, subject to the Central Bank
          rules.
          See “Key Information—Exchange Rates Information”.
  Under
          Brazilian law, whenever there is a serious imbalance in Brazil’s balance of
          payments or reasons to foresee a serious imbalance, the Brazilian government
          may
          impose temporary restrictions on the remittance to foreign investors of
          the
          proceeds of their investments in Brazil, and on the conversion of Brazilian
          currency into foreign currencies. Such restrictions may hinder or prevent
          the
          custodian or holders who have exchanged American Depositary Shares for
          underlying preferred shares or common shares from converting distributions
          or
          the proceeds from any sale of such shares, as the case may be, into U.S.
          dollars
          and remitting such U.S. dollars abroad.
  **TAXATION**
  The
          following discussion summarizes the principal Brazilian and U.S. Federal
          income
          tax consequences of acquiring, holding and disposing of notes, preferred
          shares
          or preferred ADSs or AmBev’s common shares or common ADSs. This discussion is
          not a comprehensive discussion of all the tax considerations that may be
          relevant to a decision to purchase, hold or dispose notes, preferred shares
          or
          preferred ADSs or common shares or common ADSs and is not applicable to
          all
          categories of investors, some of which may be subject to special rules.
          Each
          prospective purchaser is urged to consult its own tax advisor about the
          particular Brazilian and U.S. tax consequences to it of an investment in
          the
          preferred shares or preferred ADSs or common shares or common ADSs.
  The
          summary is based upon tax laws of Brazil and the U.S. and the regulations
          thereunder, as in effect on the date hereof, which are subject to change
          (possibly with retroactive effect). Although there is at present no income
          tax
          treaty between Brazil and the U.S., the tax authorities of the two countries
          have had discussions that may culminate in a treaty. No assurance can be
          given,
          however, as to whether or when a treaty will enter into force or of how
          it will
          affect the U.S. Holders of any of the notes, preferred shares, preferred
          ADSs,
          common shares, or common ADSs. This summary is also based on representations
          of
          the depositary and on the assumption that each obligation in the Deposit
          Agreement relating to the preferred ADSs and common ADSs, as applicable,
          and the
          related documents will be performed in accordance with its terms.
  **Brazilian
          Tax Considerations**
  The
          following discussion summarizes the principal Brazilian tax consequences
          of the
          acquisition, ownership and disposition of preferred and common shares of
          AmBev
          or preferred and common ADSs of AmBev by a holder that is not deemed to
          be
          domiciled in Brazil for purposes of Brazilian taxation and, in the case
          of a
          holder of preferred or common shares, which has registered its investment
          in
          such securities with the Central Bank as a U.S. dollar investment (in each
          case,
          a Non-Brazilian Holder).
  114
  The
          discussion does not purport to be a comprehensive description of all tax
          considerations that may be relevant to a decision to purchase preferred
          or
          common shares or preferred or common ADSs. It is based on Brazilian law
          as
          currently in effect. Any change in such law may change the consequences
          described below. The following discussion does not specifically address
          all of
          the Brazilian tax considerations applicable to any particular Non-Brazilian
          Holder, and each Non-Brazilian Holder should consult his or her own tax
          advisor
          concerning the Brazilian tax consequences of an investment in preferred
          or
          common shares or preferred or common ADSs of AmBev.
  Taxation
          of Dividends .
          Dividends, including dividends in kind, paid by AmBev to The Bank of New
          York in
          respect of the preferred or common shares underlying the ADSs or to a
          Non-Brazilian Holder in respect of preferred or common shares generally
          will not
          be subject to Brazilian withholding tax. Dividends relating to profits
          generated
          after January 1, 1996 are not subject to withholding tax in Brazil. We
          have no
          profits generated before January 1, 1996 to be distributed.
  Taxation
          of Gains .
          Gains
          realized outside Brazil by a Non-Brazilian Holder on the disposition of
          assets
          located in Brazil, including preferred or common shares, to a Brazilian
          resident
          or to a non-resident of Brazil are subject to Brazilian tax, as of February
          2004. In this case, gains would be subject to a 15% withholding tax rate,
          except
          if the Non-Brazilian Holder is located in a tax-haven jurisdiction, as
          defined
          by Brazilian law, in which case the applicable rate would be 25%. A tax-haven
          jurisdiction is defined as a jurisdiction which does not tax income or
          which has
          an income tax rate lower than 20%, and the Brazilian tax authorities regularly
          issue a list of jurisdictions which are considered tax-haven
          jurisdictions. 1
  We
          understand that ADSs are not assets located in Brazil for the purposes
          of the
          above-mentioned taxation. However, we are unable to predict how Brazilian
          courts
          would view this issue, and to date, there is no judicial or administrative
          precedent on this specific matter. The withdrawal of preferred or common
          ADSs in
          exchange for preferred or common shares is not subject to Brazilian tax.
          The
          deposit of AmBev’s preferred or common shares in connection with the issuance of
          preferred or common ADSs is not subject to Brazilian tax, provided that
          the
          preferred or common shares are registered under the Foreign Investment
          Regulations—Resolution No. 2,689—and the investor is not located in a tax-haven
          jurisdiction. There is a special taxation system applicable to Non-Brazilian
          Holders (provided investments are duly registered under the Foreign Investment
          Regulations—Resolution No. 2,689—and with the CVM and other conditions are
          fulfilled). Upon receipt of the underlying preferred or common shares,
          a
          Non-Brazilian Holder who qualifies under the Foreign Investment Regulations
          will
          be entitled to register the U.S. dollar value of such shares with the Central
          Bank as described below.
  Non-Brazilian
          Holders are generally subject to withholding tax at a rate of 15% (transactions
          occurred after January 1, 2005) on gains realized on sales or exchanges
          in
          Brazil of preferred or common shares that occur on a Brazilian stock exchange,
          unless (a) such a sale is made within five business days of the withdrawal
          of
          such preferred or common shares in exchange for ADSs and the proceeds of
          such
          sale are remitted abroad within such five-day period and the investor is
          not
          located in a tax-haven jurisdiction, or (b) such a sale is made under the
          Foreign Investment Regulations—Resolution No. 2,689—by Non-Brazilian Holders
          which register with the CVM, in which case such gains are exempt. If the
          foreign
          investor is located in a tax-haven jurisdiction, it will be subject to
          the same
          general taxation rules applicable to Brazilian residents. The “gain realized” as
          a result of a transaction on a Brazilian stock exchange is the difference
          between the amount in Brazilian currency realized on the sale or exchange
          of the
          shares and their acquisition cost, without any correction for
          inflation.
 
 1The countries currently included in this list, according to Normative
                    Instruction of the Brazilian Federal Revenue Service No. 188/02,
                    are:
                    American Samoa, Andorra, Anguilla, Antigua and Barbuda, Aruba,
                    Bahamas,
                    Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Campione
                    D’Italia, Cayman Islands, Channel Islands (Jersey, Guernsey, Alderney
                    and
                    Sark), Cook Islands, Costa Rica, Cyprus, Djibouti, Dominica,
                    Gibraltar,
                    Grenada, Hong Kong, Isle of Man, Lebanon, Lebuan, Liberia, Liechtenstein,
                    Luxembourg (only to holding companies governed by Law dated 7/31/1929),
                    Macau, Madeira Islands, Maldives, Malta, Marshall Islands, Mauritius,
                    Monaco, Montserrat, Nauru, Netherland Antilles, Niue, Oman, Panama,
                    Saint
                    Kitts and Nevis, Saint Lucia, Saint Vincent and The Grenadines,
                    San
                    Marino, Seychelles, Singapore, Tonga, Turks and Caicos Islands,
                    United
                    Arab Emirates, US Virgin Islands, Vanuatu and Western
                    Samoa.
  115
  The
“gain
          realized” as a result of a transaction with shares which are registered under a
          Law No. 4,131 certificate of registration of investment will be calculated
          based
          on the foreign currency amount registered with the Central Bank and will
          accordingly be subject to tax at a rate of 15% (or 25% if domiciled in
          a
          tax-haven jurisdiction). There can be no assurance that the current preferential
          treatment for holders of ADSs and Non-Brazilian Holders of preferred and
          common
          shares under the Foreign Investment Regulations will continue in the future
          or
          that it will not be changed in the future. Reductions in the tax rate provided
          for by Brazil’s tax treaties (except for the tax treaty signed between Japan and
          Brazil) do not apply to tax on gains realized on sales or exchanges of
          preferred
          or common shares.
  Any
          exercise of preemptive rights relating to the preferred or common shares
          or
          preferred or common ADSs of AmBev will not be subject to Brazilian taxation.
          Any
          exercise of preemptive rights relating to the common shares or ADSs will
          not be
          subject to Brazilian taxation. Gains on the sale of preemptive rights relating
          to the common shares will be treated differently for Brazilian tax purposes
          depending on (i) whether the sale is made by The Bank of New York or the
          investor and (ii) whether the transaction takes place on a Brazilian stock
          exchange. Gains on sales made by the depositary on a Brazilian stock exchange
          are not taxed in Brazil, but gains on other sales may be subject to tax
          at rates
          of up to 15%, if the ADSs were to be considered assets located in Brazil
          by the
          tax authorities.
  The
          United States and Brazil do not currently have any reciprocal tax treaty
          regarding tax withholding provisions.
  Distributions
          of Interest Attributable to Shareholders’ Equity .
          In
          accordance with Law No. 9,249, dated December 26, 1995, Brazilian corporations
          may make payments to shareholders characterized as distributions of interest
          on
          the company’s shareholders’ equity. Such interest is limited to the TJLP as
          determined by the Central Bank from time to time, and cannot exceed the
          greater
          of:
  ·
                50%
                    of net income (before taking such distribution and any deductions
                    for
                    income taxes into account) for the period in respect of which
                    the payment
                    is made; or·
                50%
                    of retained earnings.
  Distributions
          of interest on shareholders’ equity in respect of the preferred or common shares
          paid to shareholders who are either Brazilian residents or non-Brazilian
          residents, including holders of ADSs, are subject to Brazilian withholding
          tax
          at the rate of 15% (25% if the payee is domiciled in a tax-haven jurisdiction)
          and shall be deductible by AmBev as long as the payment of a distribution
          of
          interest is approved in a general meeting of shareholders of AmBev. The
          distribution of interest on shareholders’ equity may be determined by the Board
          of Directors of AmBev. No assurance can be given that the Board of Directors
          of
          AmBev will not determine that future distributions of profits may be made
          by
          means of interest on shareholders’ equity instead of by means of dividends.
  The
          amounts paid as distribution of interest on shareholders’ equity are deductible
          for corporate income tax and social contribution on profit, both of which
          are
          taxes levied on AmBev’s profits.
  **Other
          Relevant Brazilian Taxes**
  There
          are no Brazilian inheritance, gift or succession taxes applicable to the
          ownership, transfer or disposition of preferred or common shares or preferred
          or
          common ADSs by a Non-Brazilian Holder except for gift and inheritance taxes
          which are levied by some states of Brazil on gifts made or inheritances
          bestowed
          by individuals or entities not resident or domiciled in Brazil or domiciled
          within the state to individuals or entities resident or domiciled within
          such
          state in Brazil. There is no Brazilian stamp, issue, registration or similar
          taxes or duties payable by holders of preferred or common shares or preferred
          or
          common ADSs.
  A
          financial transaction tax, or the IOF tax, may be imposed on a variety
          of
          transactions, including the conversion of Brazilian currency into foreign
          currency ( *e.g.* ,
          for
          purposes of paying dividends and interest). The IOF tax rate on such conversions
          is currently 0%, but the Minister of Finance has the legal power to increase
          the
          rate to a maximum of 25%. Any increase will be applicable only
          prospectively.
  116
  If
          the ADSs were considered assets located in Brazil by the tax authorities,
          the
          IOF tax may also be levied on transactions involving bonds or securities,
          even
          if the transactions are effected on Brazilian stock, futures or commodities
          exchanges. The rate of this tax with respect to common shares and ADSs
          and
          preferred shares and ADRs is currently 0%. The Minister of Finance, however,
          has
          the legal power to increase the rate to a maximum of 1.5% of the amount
          of the
          taxed transaction per each day of the investor’s holding period, but only to the
          extent there is a gain realized on the transaction and only on a prospective
          basis.
  CPMF .
          Financial transfers are taxed by the CPMF (Temporary Contribution over
          Financial
          Transactions), at a rate of 0.38%. Transactions conducted through the Brazilian
          stock exchanges in current accounts specified for stock exchange transactions
          are exempt from the CPMF tax. Further, as of August 2004, Brazilian holders
          may
          elect to make investments through a special investment account, which is
          free
          from CPMF. In this case, the tax only applies upon the transfer of funds
          from
          the banking account to the investment account. Once deposited in this account,
          funds may be withdrawn without the CPMF. However, funds deposited in the
          investment account must only be bound for investments.
  Registered
          Capital .
          The
          amount of an investment in preferred or common shares held by a Non-Brazilian
          Holder who qualifies under the Foreign Investment Regulations and obtains
          registration with the CVM, or by The Bank of New York, as the depositary
          representing such holder, is eligible for registration with the Central
          Bank.
          Such registration allows the remittance outside of Brazil of any proceeds
          of
          distributions on the shares, and amounts realized with respect to disposition
          of
          such shares. The amounts received in Brazilian currency are converted into
          foreign currency through the use of the market rate. The registered capital
          for
          preferred shares purchased in the form of a preferred ADS or common shares
          purchased in the form of a common ADS or purchased in Brazil, and deposited
          with
          The Bank of New York in exchange for a preferred or common ADS, will be
          equal to
          their purchase price (in U.S. dollars) to the purchaser. The registered
          capital
          for preferred or common shares that are withdrawn upon surrender of preferred
          or
          common ADSs, as applicable, will be the U.S. dollar equivalent of the average
          price of the preferred or common shares, as applicable, on the Brazilian
          stock
          exchange on which the greatest number of such preferred or common shares,
          as
          applicable, was sold on the day of withdrawal. If no preferred or common
          shares,
          as applicable, were sold on such day, the registered capital will refer
          to the
          average price on the Brazilian stock exchange on which the greatest number
          of
          preferred or common shares, as applicable, was sold in the 15 trading sessions
          immediately preceding such withdrawal. The U.S. dollar value of the preferred
          or
          common shares, as applicable, is determined on the basis of the average
          market
          rate quoted by the Central Bank on such date or, if the average price of
          preferred or common shares is determined under the last preceding sentence,
          the
          average of such average quoted rates on the same 15 dates used to determine
          the
          average price of the preferred or common shares.
  A
          Non-Brazilian Holder of preferred or common shares may experience delays
          in
          effecting such action which may delay remittances abroad. Such a delay
          may
          adversely affect the amount, in U.S. dollars, received by the Non-Brazilian
          Holder.
  **Brazilian
          Taxation on the Notes**
  This
          summary is limited to noteholders that are non-residents in Brazil and
          is based
          on the tax regulations presently in force, thus not contemplating any possible
          changes in Brazilian tax legislation in the future.
  Interest
          on the notes (including any additional amount) paid, credited, delivered,
          used
          or remitted to non-residents is subject to a 15% withholding income tax
          or a
          lower rate if so provided for in the applicable double taxation treaty
          signed
          between Brazil and the country where the recipient of the note is domiciled.
          The
          rate is increased to 25% if both of the following situations occur: (i)
          the
          beneficiary of the payment is domiciled in a tax-haven jurisdiction, defined
          by
          Brazilian tax laws as a country that does not impose a tax on income or
          imposes
          such a tax at 20% or less, and (ii) if any portion of principal under any
          such
          debt obligation is repaid in a way that the average maturity of the debt
          obligation becomes less than 96 months from the disbursement date. In this
          case
          payments made by the obligor to those beneficiaries in respect of interest
          and
          other additional amounts will be retroactively subject to a withholding
          tax of
          25% plus an interest penalty for late payment, calculated from the disbursement
          date onwards.
  117
  Brazilian
          tax law expressly authorizes that the payment of this withholding income
          tax be
          borne by the Brazilian paying entity, allowing the payment of the remuneration
          free of any tax. Under the terms of the indentures related to the notes,
          all
          payments of or in respect of principal and interest on the notes shall
          be made
          free and clear of, and without withholding or deduction for or on account
          of,
          any present or future taxes, penalties, fines, duties, assessments or other
          governmental charges of whatever nature.
  In
          our view, the notes do not fall within the definition of assets located
          in
          Brazil for purposes of assessing whether a taxable transaction took place
          between two non-residents. However, we are unable to predict how Brazilian
          courts would view this issue, and to date there is no judicial or administrative
          precedent on this specific matter.
  **Material
          United States Federal Income Tax Considerations**
  The
          following summary describes the material U.S. Federal income tax consequences
          of
          holding notes, preferred shares, preferred ADSs, common shares or common
          ADSs.
          This summary is based on the Internal Revenue Code of 1986, as amended
          (the
“Code”), its legislative history, existing final, temporary and proposed
          Treasury Regulations, rulings and judicial decisions, all as currently
          in effect
          and all of which are subject to prospective and retroactive rulings and
          changes.
  This
          summary does not purport to address all U.S. Federal income tax consequences
          that may be relevant to a particular holder and you are urged to consult
          your
          own tax advisor regarding your specific tax situation. The summary applies
          only
          to holders who hold notes, preferred shares, preferred ADSs, common shares
          or
          common ADSs as “capital assets” (generally, property held for investment) under
          the Code, and, in the case of the notes, only holders who purchased their
          notes
          in the initial offering at the issue price. This summary does not address
          the
          tax consequences that may be relevant to holders in special tax situations
          including, for example:
  ·
                insurance
                    companies;·
                tax-exempt
                    organizations;·
                dealers
                    in securities or currencies;·
                traders
                    in securities that elect to use a mark-to-market method of accounting
                    for
                    their securities holdings;·
                banks,
                    mutual funds or other financial institutions;·
                United
                    States holders whose functional currency for tax purposes is
                    not the
                    United States dollar;·
                United
                    States expatriates;·
                an
                    S corporation or small business investment company;·
                real
                    estate investment trusts;·
                investors
                    in a pass-through entity;·
                holders
                    of notes, preferred shares, preferred ADSs, common shares or
                    common ADSs
                    as part of a hedge, straddle, conversion or other integrated
                    transaction,
                    for tax purposes;·
                holders
                    who own, directly, indirectly or constructively, 10% or more
                    of the total
                    combined voting power of our stock (including by way of owning
                    preferred
                    shares, preferred ADSs, common shares or common ADSs);
                    or·
                holders
                    who acquired their notes, preferred shares, preferred ADSs, common
                    shares
                    or common ADSs as compensation.
  118
  This
          summary assumes that each of the notes represent indebtedness of U.S.$500
          million and that we are not a passive foreign investment company (“PFIC”) for
          U.S. Federal income tax purposes. Please see the discussion under “—Taxation of
          U.S. Holders—Passive Foreign Investment Company Rules” below.
  Further,
          this summary does not address the alternative minimum tax consequences
          of
          holding notes, preferred shares, preferred ADSs, common shares or common
          ADSs or
          the indirect consequences to holders of equity interests in entities that
          own
          our preferred shares, preferred ADSs, common shares or common ADSs. In
          addition,
          this summary does not address the state, local, foreign or other tax
          consequences, if any, of holding our notes, preferred shares, preferred
          ADSs,
          common shares or common ADSs.
  You
          should consult your own tax advisor regarding the U.S. Federal, state,
          local and
          foreign and other tax consequences of acquiring, owning and disposing of
          notes,
          preferred shares, preferred ADSs, common shares or common ADSs in your
          particular circumstances.
  **Taxation
          of U.S. Holders**
  For
          purposes of this summary, you are a “U.S. Holder” if you are a beneficial owner
          of a note, preferred shares, preferred ADSs, common shares or common ADSs
          and
          you are for U.S. Federal income tax purposes:
  ·
                a
                    citizen or resident of the United States;·
                a
                    corporation, or any other entity taxable as a corporation, created
                    or
                    organized in or under the laws of the United States or any state
                    thereof,
                    including the District of Columbia;·
                an
                    estate the income of which is subject to U.S. Federal income
                    tax
                    regardless of its source;·
                a
                    trust if a court within the United States is able to exercise
                    primary
                    supervision over its administration and one or more United States
                    persons
                    have the authority to control all substantial decisions of the
                    trust;
                    or·
                a
                    person otherwise subject to U.S. Federal income taxation on its
                    worldwide
                    income.
  If
          a partnership holds notes, preferred shares, preferred ADSs, common shares
          or
          common ADSs, the tax treatment of a partner will generally depend upon
          the
          status of the partner and upon the activities of the partnership. A partner
          of a
          partnership holding notes, preferred shares, preferred ADSs, common shares
          or
          common ADSs should consult its own tax advisor.
  A
          “Non-U.S. Holder” is a beneficial owner of a note, preferred shares, preferred
          ADSs, common shares or common ADSs who or which is not a U.S.
          Holder.
  For
          U.S. Federal income tax purposes, a U.S. Holder of an ADS will be treated
          as the
          beneficial owner of the preferred shares or common shares represented by
          the
          applicable ADS.
  **Notes**
  ***Interest
          and Additional Amounts***
  Interest
          on the notes will generally be includible in a U.S. Holder’s gross income at the
          time the interest is accrued or received, in accordance with the U.S. Holder’s
          regular method (cash or accrual) of tax accounting. To the extent that
          amounts
          are withheld, a U.S. Holder will be required to report income in an amount
          greater than the cash actually received in connection with the relevant
          payments.
  119
  ***Sale,
          Exchange, Retirement or Other Disposition***
  Unless
          a nonrecognition provision applies, a U.S. Holder generally will recognize
          capital gain or loss upon the sale, exchange, retirement or other disposition
          of
          a note in an amount equal to the difference between the amount realized
          upon
          such sale, exchange, retirement or other disposition (less any accrued
          interest
          not yet taken into income which will be taxable as ordinary interest income)
          and
          the U.S. Holder’s tax basis in such note. Any such capital gain or loss will be
          long-term capital gain or loss if the U.S. Holder has held the note for
          more
          than one year at the time of sale, exchange, retirement or other disposition.
          A
          U.S. Holder’s ability to offset capital losses against ordinary income is
          limited.
  ***Foreign
          Tax Credit***
  Interest
          on the notes will be treated as foreign source income for U.S. Federal
          income
          tax purposes, which may be relevant to a U.S. Holder in calculating such
          U.S.
          Holder’s foreign tax credit limitation. A U.S. Holder may be eligible, subject
          to a number of complex limitations, to claim a foreign tax credit or deduction
          against such U.S. Holder’s U.S. Federal tax income liability for taxes withheld
          on payments from the notes. The limitation on foreign taxes eligible for
          credit
          is calculated separately with respect to specific classes of income. For
          this
          purpose, interest on the notes (including any additional amounts) will
          be
          treated as “passive income”. We urge all holders to consult their tax advisors
          regarding the availability of the U.S. foreign tax credit under their particular
          circumstances.
  Any
          gain or loss realized on the sale, exchange, retirement or other disposition
          of
          a note generally will be treated as U.S. sourced for purposes of computing
          the
          U.S. foreign tax credit limitation.
  **Preferred
          Shares, Preferred ADSs, Common Shares, Common ADSs**
  ***Distributions
          on preferred shares, preferred ADSs, common shares or common
          ADSs.***
  Subject
          to the discussion below concerning PFICs, the gross amount of distributions
          paid
          by us to a U.S. Holder (including amounts withheld to pay Brazilian withholding
          taxes) with respect to preferred shares, preferred ADSs, common shares
          or common
          ADSs (including distributions of interest on shareholders’ equity) generally
          will be taxable to such U.S. Holder as ordinary dividend income or qualified
          dividend income (as further described below) to the extent that such
          distribution is paid, actually or constructively, out of our current or
          accumulated earnings and profits (as determined for U.S. Federal income
          tax
          purposes). Distributions in excess of our current or accumulated earnings
          and
          profits will be treated first as a non-taxable return of capital reducing
          (on a
          dollar-for-dollar basis) such U.S. Holder’s tax basis in the preferred shares,
          preferred ADSs, common shares or common ADSs, as applicable. Any distribution
          in
          excess of such tax basis will be treated as capital gain and will be either
          long-term or short-term capital gain depending upon whether the U.S. Holder
          held
          the preferred shares, preferred ADSs, common shares or common ADSs, as
          applicable, for more than one year.
  Dividends
          received by a U.S. Holder will generally be taxed at ordinary income tax
          rates.
          However, pursuant to the Jobs and Growth Tax Relief Reconciliation Act
          of 2003,
          in the case of dividends that constitute qualified dividend income and
          are
          received by an individual U.S. Holder during the tax years beginning after
          2002
          and before 2009, such dividends will be taxed at the same rate that is
          applicable to long-term capital gains. For this purpose, qualified dividend
          income includes any dividends paid with respect to stock in a foreign
          corporation if such stock is “readily tradable on an established securities
          market in the United States”. Based upon United States Internal Revenue Service
          Notice 2003-71, the preferred ADSs and common ADSs will, but the preferred
          shares and common shares will not, be treated as readily tradable on an
          established securities market in the United States.
  A
          U.S. Holder generally will be entitled, subject to a number of complex
          rules and
          limitations, to claim a United States foreign tax credit in respect of
          any
          Brazilian withholding taxes imposed on distributions received on preferred
          shares, preferred ADSs, common shares or common ADSs. U.S. Holders who
          do not
          elect to claim a foreign tax credit may instead claim a deduction in respect
          of
          such withholdings. Dividends received with respect to the preferred shares,
          preferred ADSs, common shares or common ADSs will be treated as foreign
          source
          income and generally will constitute “passive income” for U.S. foreign tax
          credit limitation purposes. We urge all holders to consult their tax advisors
          regarding the availability of the foreign tax credit under their particular
          circumstances.
  120
  Dividends
          paid by us generally will not be eligible for the dividends received deduction
          generally available to certain U.S. corporate shareholders.
  The
          amount of any cash distribution paid in Brazilian currency will equal the
          U.S.
          dollar value of the distribution, calculated by reference to the exchange
          rate
          in effect at the time the distribution is received by the depositary (in
          the
          case of ADSs) or by the U.S. Holder (in the case of preferred shares or
          common
          shares held directly by such U.S. Holder), regardless of whether the payment
          is
          in fact converted to U.S. dollars at that time. A U.S. Holder should not
          recognize any foreign currency gain or loss if such Brazilian currency
          is
          converted into U.S. dollars on the date received. If the Brazilian currency
          is
          not converted into U.S. dollars on the date of receipt, however, gain or
          loss
          may be recognized upon a subsequent sale or other disposition of the Brazilian
          currency. Such foreign currency gain or loss, if any, generally will be
          U.S.
          sourced ordinary income or loss.
  Section
          305 of the Code provides special rules for the tax treatment of preferred
          stock.
          According to the Treasury Regulations under that section, the term preferred
          stock generally refers to stock which enjoys certain limited rights and
          privileges (generally associated with specified dividend and liquidation
          priorities) but does not participate in corporate growth to any significant
          extent. While our preferred shares have some preferences over our common
          shares,
          the preferred shares are not fixed as to dividend payments or liquidation
          value;
          thus, although the matter is not entirely clear, we believe and have taken
          and
          intend to continue to take the position, that the preferred shares should
          be
          treated as “common stock” within the meaning of Section 305 of the Code. If the
          preferred shares are treated as “common stock” for purposes of Section 305 of
          the Code, distributions to U.S. Holders of additional shares of such “common
          stock” or preemptive rights relating to such “common stock” with respect to
          their preferred shares or preferred ADSs that are made as part of a pro
          rata
          distribution to all shareholders in most instances will not be subject
          to U.S.
          Federal income tax. On the other hand, if the preferred shares are treated
          as
“preferred stock” within the meaning of Section 305 of the Code, and if the
          U.S. Holder receives a distribution of additional shares or preemptive
          rights as
          described in the preceding sentence, such distributions (including amounts
          withheld in respect of any Brazilian taxes) will be treated as dividends
          that
          can be included in the U.S. Holder’s gross income to the same extent and in the
          same manner as distributions payable in cash. In that event, the amount
          of such
          distribution (and the basis of the new shares or preemptive rights so received)
          will equal the fair market value of the shares or preemptive rights on
          the date
          of distribution.
  ***Sale,
          exchange or other disposition of preferred shares, preferred ADSs, common
          shares
          or common ADSs.***
  A
          U.S. Holder will generally recognize capital gain or loss upon the sale,
          exchange or other disposition of preferred shares, preferred ADSs, common
          shares
          or common ADSs, as applicable, measured by the difference between the U.S.
          dollar value of the amount received and the U.S. Holder’s tax basis (determined
          in U.S. dollars) in the preferred shares, preferred ADSs, common shares
          or
          common ADSs, as applicable. If a Brazilian tax is withheld on the sale
          or
          disposition of a share, the amount realized by a U.S. Holder will include
          the
          gross amount of the proceeds of that sale or disposition before deduction
          of the
          Brazilian tax. Any gain or loss will be long-term capital gain or loss
          if the
          preferred shares, preferred ADSs, common shares or common ADSs have been
          held
          for more than one year. Your ability to deduct capital losses is subject
          to
          limitations. Capital gain or loss, if any, realized by a U.S. Holder on
          the
          sale, exchange or other disposition of a common share, common ADS, preferred
          share or preferred ADS, as applicable, generally will be treated as United
          States source income or loss for U.S. foreign tax credit purposes. Consequently,
          in the case of a disposition of a common share or preferred share that
          is
          subject to Brazilian tax imposed on the gain (or, in the case of a deposit,
          in
          exchange for a common ADS or preferred ADS of a common share or preferred
          share,
          as the case may be, that is not registered pursuant to Resolution No. 2,689/00,
          on which a Brazilian capital gains tax is imposed (see “—Brazilian Tax
          Considerations—Taxation of Gains”)), the U.S. Holder may not be able to benefit
          from the foreign tax credit for that Brazilian tax unless it can apply
          (subject
          to applicable limitations) the credit against U.S. tax payable on other
          income
          from foreign sources in the appropriate income category, or, alternatively,
          it
          may take a deduction for the Brazilian tax if such U.S. Holder elects to
          deduct
          all of its foreign income taxes.
  121
  ***Passive
          Foreign Investment Company*** **(** ***“PFIC”)*** ** ***rules*** **.**
  Based
          upon the nature of its current and projected income, assets and activities,
          we
          do not believe that we are, and we do not expect the preferred shares,
          preferred
          ADSs, common shares or common ADSs to be considered shares of, a PFIC for
          U.S.
          Federal income tax purposes. In general, a foreign corporation is a PFIC
          if, for
          any taxable year in which the U.S. Holder holds stock in the foreign
          corporation, at least 75% of such corporation’s gross income is passive income
          or at least 50% of the value of such corporation’s assets (determined on the
          basis of a quarterly average) produce passive income or are held for the
          production of passive income. The determination of whether the preferred
          shares,
          preferred ADSs, common shares or common ADSs constitute shares of a PFIC
          is a
          factual determination made annually and thus may be subject to change.
          Subject
          to certain exceptions, once a U.S. Holder’s preferred shares or common shares,
          as applicable, are treated as shares in a PFIC, they remain shares in a
          PFIC. In
          addition, dividends received by a U.S. Holder from a PFIC will not constitute
          qualified dividend income.
  If
          we are treated as a PFIC, contrary to the discussion above, a U.S. Holder
          would
          be subject to special rules with respect to (a) any gain realized on the
          sale or
          other disposition of common shares, common ADSs, preferred shares or preferred
          ADSs and (b) any “excess distribution” by us to the U.S. Holder (generally, any
          distribution during a taxable year in which distributions to the U.S. Holder
          on
          the common shares, common ADSs, preferred shares or preferred ADSs exceed
          125%
          of the average annual taxable distribution the U.S. Holder received on
          the
          common shares, common ADSs, preferred shares or preferred ADSs during the
          preceding three taxable years or, if shorter, the U.S. Holder’s holding period
          for the common shares, common ADSs, preferred shares or preferred ADSs).
          Under
          those rules (a) the gain or excess distribution would be allocated ratably
          over
          the U.S. Holder’s holding period for the common shares, common ADSs, preferred
          shares or preferred ADSs, (b) the amount allocated to the taxable year
          in which
          the gain or excess distribution is realized and to taxable years before
          the
          first day we became a PFIC would be taxable as ordinary income, (c) the
          amount
          allocated to each prior year (with certain exceptions) would be subject
          to tax
          at the highest tax rate in effect for that year, and the interest charge
          generally applicable to underpayments of tax would be imposed in respect
          of the
          tax attributable to each such year.
  A
          U.S. Holder who owns common shares, common ADSs, preferred shares or preferred
          ADSs during any year we are a PFIC must file Internal Revenue Service Form
          8621.
          In general, if we are treated as a PFIC, the rules described in the second
          paragraph of this section can be avoided by a U.S. Holder that elects to
          be
          subject to a mark-to-market regime for stock in a PFIC. A U.S. Holder may
          elect
          mark-to-market treatment for its common shares, common ADSs, preferred
          shares or
          preferred ADSs, provided the common shares, common ADSs, preferred shares
          or
          preferred ADSs, for purposes of the rules, constitute “marketable stock” as
          defined in Treasury Regulations. A U.S. Holder electing the mark-to-market
          regime generally would treat any gain recognized under mark-to-market treatment
          or on an actual sale as ordinary income and would be allowed an ordinary
          deduction for any decrease in the value of common shares, common ADSs,
          preferred
          shares or preferred ADSs in any taxable year and for any loss recognized
          on an
          actual sale, but only to the extent, in each case, of previously included
          mark-to-market income not offset by previously deducted decreases in value.
          A
          U.S. Holder’s basis in common shares, common ADSs, preferred shares or preferred
          ADSs would increase or decrease by gain or loss taken into account under
          the
          mark-to-market regime. A mark-to-market election is generally irrevocable.
          Another election to treat the Company as a qualified electing fund would
          not be
          available because we do not currently plan to provide holders with information
          sufficient to permit any holder to make such election.
  ***Deposits,
          Withdrawals and Pre-release***
  Deposits
          or withdrawals of preferred shares or common shares in exchange for preferred
          ADSs or common ADSs, as applicable, will not result in the realization
          of any
          gain or loss for U.S. Federal income tax purposes. The U.S. Treasury Department,
          however, has expressed concerns that parties involved in transactions where
          depositary shares are pre-released may be taking actions that are not consistent
          with the claiming of foreign tax credits by the holders of the applicable
          ADSs.
          Accordingly, the analysis of the credibility of Brazilian taxes described
          above
          could be affected by future actions that may be taken by the U.S. Treasury
          Department.
  **Taxation
          of Non-U.S. Holders**
  ***Notes***
  A
          Non-U.S. Holder will not be subject to U.S. Federal income tax with respect
          to
          any interest derived in respect of the notes, unless (and, if so, such
          Non-U.S.
          Holder will be subject to U.S. Federal income tax as if such Non-U.S. Holder
          were a U.S. Holder, as described above), such interest income is effectively
          connected with a trade or business that such Non-U.S. Holder conducts in
          the
          United States and, if required by an income tax treaty, such interest is
          attributable to a permanent establishment or, in the case of an individual
          Non-U.S. Holder, a fixed base such Non-U.S. Holder maintains in the United
          States.
 
 122
  A
          Non-U.S. Holder will not be subject to U.S. Federal income tax with respect
          to
          any gain recognized in connection with the sale, exchange, retirement or
          other
          disposition of notes, unless (i) the gain is effectively connected with
          a trade
          or business that such Non-U.S. Holder conducts in the United States and,
          if
          required by an income tax treaty, such interest is attributable to a permanent
          establishment or, in the case of an individual Non-U.S. Holder, a fixed
          base
          such Non-U.S. Holder maintains in the United States or (ii) in the case
          of an
          individual Non-U.S. Holder, such Non-U.S. Holder is present in the United
          States
          for at least 183 days in the taxable year of such sale, exchange, retirement
          or
          other disposition and certain other conditions are met. If the first exception
          applies, the Non-U.S. Holder will be subject to U.S. Federal income tax
          as if
          such Non-U.S. Holder were a U.S. Holder, as described above. On the other
          hand,
          if the second exception applies, then, generally speaking, such Non-U.S.
          Holder
          will be subject to U.S. Federal income tax at a rate of 30% on the amount
          by
          which such Non-U.S. Holder’s U.S.-source capital gains exceed such Non-U.S.
          Holder’s U.S.-source capital losses.
  In
          addition, effectively connected interest or gains realized by a Non-U.S.
          Holder
          that is a corporation for U.S. Federal income tax purposes may also, under
          certain circumstances, be subject to an additional “branch profits tax” at a
          rate of 30% (or such lower rates as may be specified by an applicable income
          tax
          treaty).
  ***Preferred
          Shares, Preferred ADSs, Common Shares or Common ADSs.***
  Non-U.S.
          Holders generally will not be subject to U.S. Federal income or withholding
          tax
          on dividends received from us with respect to preferred shares, preferred
          ADSs,
          common shares or common ADSs, unless such income is considered effectively
          connected with the Non-U.S. Holder’s conduct of a United States trade or
          business (and, if required by an applicable income tax treaty, the income
          is
          attributable to a permanent establishment or, in the case of an individual
          Non-U.S. Holder, a fixed base maintained in the United States).
  Non-U.S.
          Holders generally will not be subject to U.S. Federal income tax on any
          gain
          realized upon the sale, exchange or other disposition of preferred shares,
          preferred ADSs, common shares or common ADSs unless (i) the gain is effectively
          connected with the Non-U.S. Holder’s conduct of a United States trade or
          business and, if required by an applicable income tax treaty, the income
          is
          attributable to a permanent establishment or, in the case of an individual
          Non-U.S. Holder, a fixed base maintained in the United States or (ii) such
          Non-U.S. Holder is an individual who is present in the United States for
          183
          days or more during the taxable year of such sale, exchange or other disposition
          and certain other conditions are met. If the first exception applies, the
          Non-U.S. Holder will be subject to U.S. Federal income tax as if such Non-U.S.
          Holder were a U.S. Holder, as described above. On the other hand, if the
          second
          exception applies, then, generally speaking, Non-U.S. Holder will be subject
          to
          U.S. Federal income tax at a rate of 30% on the amount by which such Non-U.S.
          Holder’s U.S.-source capital gains exceed such Non-U.S. Holder’s U.S.-source
          capital losses.
  In
          addition, any effectively connected dividends or gains realized by a Non-U.S.
          Holder that is a corporation for U.S. Federal income tax purposes may also,
          under certain circumstances, be subject to an additional branch profits
          tax at a
          rate of 30% (or such lower rate as may be specified by an applicable income
          tax
          treaty).
  **Backup
          Withholding and Information Reporting**
  In
          general, payments of principal and interest on the notes, dividends paid
          on, or
          proceeds from the sale, exchange, retirement or other dispositions of the
          notes,
          dividends on preferred shares, preferred ADSs, common shares or common
          ADSs and
          payments of the proceeds of a sale, exchange, retirement or other disposition
          of
          notes, preferred shares, preferred ADSs, common shares or common ADSs,
          may be
          subject to information reporting to the United States Internal Revenue
          Service
          (“IRS”) and, possibly, United States backup withholding. Backup withholding will
          not apply, however, to a holder who furnishes a correct taxpayer identification
          number or certificate of foreign status and makes any other required
          certification on IRS Form W-9. Non-U.S. Holders generally will not be subject
          to
          United States information reporting or backup withholding. However, Non-U.S.
          Holders may be required to provide certification of non-U.S. status in
          connection with payments received in the United States or through certain
          U.S.-related financial intermediaries. Amounts withheld as backup withholding
          may be credited against a holder’s U.S. Federal income tax liability, and a
          holder may obtain a refund of any excess amounts withheld under the backup
          withholding rules by filing the appropriate claim for refund with the IRS
          and
          furnishing any required information.
  123
  THE
          PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
          IS FOR
          GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR
          SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
          CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF NOTES, PREFERRED SHARES,
          PREFERRED ADSs, COMMON SHARES OR COMMON ADSs, INCLUDING THE APPLICABILITY
          AND
          EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF ANY PROPOSED
          CHANGES IN APPLICABLE LAW.
  **WHERE
          YOU CAN FIND MORE INFORMATION**
  AmBev
          is subject to the informational reporting requirements of the United States
          Securities Exchange Act of 1934, as amended, and files with the
          SEC:
  ·
                annual
                    reports;·
                certain
                    other reports that we make public under Brazilian law, file with
                    the
                    Brazilian stock exchanges or distribute to shareholders;
                    and·
                other
                    information.
  You
          may read and copy any reports or other information that AmBev files at
          the SEC’s
          public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
          and at
          the SEC’s regional offices located at the Woolworth Building, 233 Broadway,
          New York, New York 10279 and Citicorp Center, 500 West Madison
          Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
          1-800-SEC-0330 for further information on the public reference rooms. Electronic
          filings made through the Electronic Data Gathering, Analysis and Retrieval
          System are also publicly available through the Securities and Exchange
          Commission’s website on the Internet at *www.sec.gov* .
          In
          addition, material filed by AmBev may also be inspected at the offices
          of the
          New York Stock Exchange at 20 Broad Street, New York,
          New York 10005.
  As
          a foreign private issuer, AmBev is exempt from the rules under the Exchange
          Act
          prescribing the furnishing and content of proxy statements and will not
          be
          required to file proxy statements with the SEC, and its officers, directors
          and
          principal shareholders will be exempt from the reporting and “short swing”
profit recovery provisions contained in Section 16 of the Exchange
          Act.
  You
          may obtain documents from AmBev by requesting them in writing, at the following
          addresses or by telephone:
  Companhia
                    de Bebidas das Américas—AmBevAttention:
                Investor
                    Relations DepartmentTelephone
                    numbers:
                (55-11)
                    2122-1415(55-11)
                    2122-1414Fax:
                (55-11)
                    2122-1526Email:
                *ir@ambev.com.br*
  You
          may obtain additional information about AmBev on its website at *www.ambev-ir.com* .
          The
          information contained therein is not part of this annual report.
  124
  **Quantitative
          and Qualitative Disclosures about Market Risk**
  **QUANTITATIVE
          AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
  We
          are exposed to various market risks, including changes in foreign currency
          exchange rates and interest rates and changes in the prices of certain
          commodities, including malt, aluminum and sugar. Market risk is the potential
          loss arising from adverse changes in market rate and prices. We enter into
          derivatives and other financial instruments, in order to manage and reduce
          the
          impact of fluctuations in commodity prices, in foreign currency exchange
          rates
          and in interest rates. We have established policies and procedures for
          risk
          assessment and the approval, reporting and monitoring of derivative financial
          activities. Decisions regarding hedging are made according to our risk
          management policy, taking into consideration the amount and duration of
          the
          exposure, market volatility and economic trends.
  These
          instruments are accounted for based on their characteristics. See Note
          2(v) to
          our audited consolidated financial statements for a discussion of the accounting
          policies and information on derivative financial instruments.
  We
          have a policy of entering into contracts only with parties that have high
          credit
          ratings. The counterparties to these contracts are major financial institutions,
          and we do not have significant exposure to any single counterparty. We
          do not
          anticipate a credit loss from counterparty non-performance. Our short-term
          investments consist mainly of fixed-term obligations and government
          securities.
  **Commodity
          Risk**
  We
          use a large volume of agricultural materials to produce our products, including
          malt and hops for our beer and sugar, guaraná, other fruits and sweeteners for
          our soft drinks. See “Information on the Company—AmBev Business
          Overview—Production and Availability of Raw Materials”. We purchase a
          significant portion of our malt and all of our hops outside of Brazil.
          We
          purchase the remainder of our malt and our sugar, guaraná and other fruits and
          sweeteners locally. AmBev also purchases substantial quantities of aluminum
          cans.
  We
          produce approximately 90% of our malt. The remainder and all other commodities
          are purchased from third parties. We believe that adequate supplies of
          the
          commodities we use are available at the present time, but we cannot predict
          the
          future availability of these commodities or the prices we will have to
          pay for
          such commodities. The commodity markets have experienced and will continue
          to
          experience price fluctuations. We believe that the future price and supply
          of
          agricultural materials will be determined by, among other factors, the
          level of
          crop production, weather conditions, export demand, and government regulations
          and legislation affecting agriculture, and that the price of aluminum and
          sugar
          will be largely influenced by international market prices. See “Information on
          the Company—AmBev Business Overview—Production and Availability of Raw
          Materials”.
  All
          of the hops we purchase in the international markets outside of South America
          are paid for in U.S. dollars. In addition, although we purchase aluminum
          cans
          and sugar in Brazil, the price is directly influenced by the fluctuation
          of
          international commodity prices.
  As
          of December 31, 2005, our derivative activities consisted of sugar, wheat
          and
          aluminum futures. The table below provides information about our significant
          commodity risk sensitive instruments as of December 31, 2005. The contract
          terms
          of these instruments have been categorized by expected maturity dates.
  **Principal
                      Maturity Periods****(1)****2006**
                  
                  **2007**
                  
                  **2008**
                  
                  **2009**
                  
                  **2010**
                  
                  **Thereafter**
                  
                  **Total**
                  
                  **Fair
                      Value***(R$
                      million, except price per ton)***Derivatives
                      Instruments****Sugar
                      Futures (NYBOT)**Notional
                      Amount (ton)
                  
                  
                  41,506
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  41,506
                  
                  
                  8,5Average
                      Price (R$/ton)
                  
                  
                  757.7**Wheat
                      Futures (CBOT)**Notional
                      Amount (ton)
                  
                  
                  35,244
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  35,244
                  
                  
                  0,7Average
                      Price (R$/ton)
                  
                  
                  291.8**Aluminum
                      Futures (LME)**Notional
                      Amount (ton)
                  
                  
                  22,400
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  22,400
                  
                  
                  23,0Average
                      Price (R$/ton)
                  
                  
                  5,339.2**Total**
 
 (1)
                Negative
                    notional amounts represent an excess of liabilities over assets
                    at any
                    given moment.(2)
                For
                    cash and debt instruments, total represents the carrying value
                    of those
                    instruments within the balance sheet and is therefore directly
                    comparable
                    with the fair value of the instrument, included within the fair
                    value
                    column. For derivative instruments, total represents the total
                    value of
                    derivative instrument contracts (notional value) within the forward,
                    future and swap portfolio, and not a balance sheet value. The
                    unrealized
                    gain or loss on the instrument at the balance sheet date is included
                    within the financial statements at fair value and is therefore
                    represented
                    under the fair value column.
  125
  **Interest
          Rate Risk**
  We
          use interest rate swap agreements to manage interest risks associated with
          changing rates. The differential to be paid or received is accrued as interest
          rates change and is recognized in interest income or expense, respectively,
          over
          the life of the particular contracts. We are exposed to interest rate volatility
          with respect to our cash and cash equivalents, short-term investments and
          fixed
          and floating rate debt. Our U.S. dollar-denominated cash equivalents generally
          bear interest at a floating rate.
  We
          are exposed to interest rate volatility with regard to existing issuances
          of
          fixed rate debt, existing issuances of variable rate debt, currency future
          and
          forward swaps agreements, cash and cash equivalents and short-term investments.
          We manage our debt portfolio in response to changes in interest rates and
          foreign currency rates by periodically retiring, redeeming and repurchasing
          debt
          and using derivative financial instruments.
  The
          table below provides information about our significant interest rate sensitive
          instruments. For variable interest rate debt, the rate presented is the
          weighted
          average rate calculated as of December 31, 2005. The contract terms of
          these
          instruments have been categorized by expected maturity dates.
  126
  **Principal
                    Maturity Periods(1)****2006**
                
                **2007**
                
                **2008**
                
                **2009**
                
                **2010**
                
                **Thereafter**
                
                **Total(2)**
                
                **Fair**
                  **Value(2)***(R$
                    in millions, except percentages)***U.S.
                    Dollar Debt Denominated (Fixed Rate)**Notional
                    Amount
                
                
                (582.2
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,340,7
                )
                
                (2,922.9
                )
                
                (3,404.3
                )Average
                    Pay Rate
                
                
                9.61
                %
                
                
                
                
                
                
                
                
                
                
                
                
                
                9.61
                %**BNDES
                    Currency Basket Debt (Floating Rate)**Currency
                    Basket DebtDenominated (Floating Rate)
                
                
                (16.0
                )
                
                (23.4
                )
                
                (22.5
                )
                
                (8.8
                )
                
                (8.1
                )
                
                (0.7
                )
                
                (79.5
                )
                
                (79.5
                )UMBNDES+Average
                    Pay Rate
                
                
                3.20
                %
                
                3.20
                %
                
                3.20
                %
                
                3.20
                %
                
                3.20
                %
                
                3.20
                %**International
                    Debt**U.S.
                    Dollar Debt Denominated (Fixed Rate)
                
                
                (246.9
                )
                
                (206.9
                )
                
                (560.9
                )
                
                (50.0
                )
                
                (41.6
                )
                
                (97.4
                )
                
                (1,203.5
                )
                
                (1,203.5
                )Average
                    Pay Rate
                
                
                6.15
                %
                
                6.23
                %
                
                3.12
                %
                
                3.89
                %
                
                3.56
                %
                
                7.6
                %**International
                    Debt**CAN
                    Dollar Debt Denominated (Fixed Rate)
                
                
                (4.8
                )
                
                
                
                
                (100.6
                )
                
                
                
                
                (1,408.2
                )
                
                (178.6
                )
                
                (1,692.2
                )
                
                (1,734.3
                )Average
                    Pay Rate
                
                
                3.54
                %
                
                
                
                
                6.07
                %
                
                
                
                
                3.81
                %
                
                7.5
                %**International
                    Debt**Other
                    Latin American Currency Denominated
                  (Fixed
                    Rate)
                
                
                (165.9
                )
                
                (17.8
                )
                
                (117.4
                )
                
                
                
                
                (178.6
                )
                
                (32.4
                )
                
                (512.1
                )
                
                (512.1
                )Average
                    Pay Rate
                
                
                10,10
                %
                
                10,10
                %
                
                10,10
                %
                
                
                
                
                10,10
                %
                
                10,10
                %**Reais
                    Debt Denominated (Floating Rate—TJLP)**Notional
                    Amount
                
                
                (104.2
                )
                
                (134.3
                )
                
                (120.8
                )
                
                (59.2
                )
                
                (47.9
                )
                
                
                
                
                (466.4
                )
                
                (466.4
                )TJLP
                    + Average Pay Rate
                
                
                3.53
                %
                
                3.53
                %
                
                3.53
                %
                
                3.53
                %
                
                3.53
                %**Reais
                    Debt—ICMS (Fixed Rate)**Notional
                    Amount
                
                
                (89.5
                )
                
                (147.1
                )
                
                (90.2
                )
                
                
                
                
                
                
                
                
                
                
                (326.8
                )
                
                (326.8
                )Average
                    Pay Rate
                
                
                4.77
                %
                
                
                
                
                4.77
                %**Cash
                    Instruments****Cash
                    and Cash Equivalent Denominated in U.S. dollar**Notional
                    Amount
                
                
                69.5
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                69.5
                
                
                69.5Average
                    Interest Rate
                
                
                1.19
                %**U.S.
                    Short-Term Investments Denominated in U.S. dollar**Notional
                    Amount
                
                
                207.3
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                207.3
                
                
                207.3Average
                    Interest Rate
                
                
                8.12
                %
 **Brazilian
                    Short-Term Investments Denominated in Reais**Notional
                    Amount
                
                
                283.4
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                283.4
                
                
                283.4Average
                    Interest Rate %CDI
                
                
                100
                %**International
                    Cash and Cash Equivalent Denominated in Other Latin American
                    Currency**Notional
                    Amount
                
                
                14.9
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                14.9
                
                
                14.9**Derivatives
                    Instruments**BM&F
                    DDI and Dollar FutureNotional
                    Amount
                
                
                (990.7
                )
                
                88.7
                
                
                617.4
                
                
                105.3
                
                
                21.8
                
                
                (101.8
                )
                
                (259.3
                )
                
                2.6Average
                    Interest Rate
                
                
                5.32
                %
                
                4.54
                %
                
                4.72
                %
                
                5.15
                %
                
                5.13
                %
                
                6.17
                %**U.S.$
                    x R$ Cross Currency Interest Rate Swap**Notional
                    Amount
                
                
                1,781.6
                
                
                187.6
                
                
                522.6
                
                
                
                
                
                
                
                
                1,369.5
                
                
                3,861.3
                
                
                (112.5
                )Average
                    Interest Rate
                
                
                4.43
                %
                
                4.48
                %
                
                6.22
                %
                
                
                
                
                
                
                
                11.59
                %**C$
                    x U.S.$ Pre Fixed Ratex****Canadian
                    Bankers Acceptance**Notional
                    Amount
                
                
                210.7
                
                
                
                
                
                156.5
                
                
                
                
                
                
                
                
                
                
                
                367.2
                
                
                (5.3
                )Average
                    Interest Rate
                
                
                5.52
                %
                
                
                
                
                5.28
                %**C$
                    x U.S.$ Cross Currency****Interest
                    Rate Swap**Notional
                    Amount
                
                
                
                
                
                
                
                
                240.5
                
                
                
                
                
                
                
                
                
                
                
                240.5
                
                
                (85.6
                )Average
                    Interest Rate
                
                
                
                
                
                
                
                
                6.65
                %**NDF
                    Argentine Peso x U.S.$**Notional
                    Amount
                
                
                206.0
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                206.0Average
                    Unit Price - Peso
                
                
                3.09**NDF
                    Peru Soles x U.S.$**Notional
                    Amount
                
                
                210.7
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                210.7
                
                
                (1.8
                )Average
                    Unit Price - Soles
                
                
                3.42
 
 (1)
                Negative
                    notional amounts represent an excess of liabilities over assets
                    on any
                    given moment.(2)
                For
                    cash and debt instruments, total represents the carrying value
                    of those
                    instruments within the balance sheet, and is therefore directly
                    comparable
                    with the fair value of the instrument included within the “Fair Value”
                    column. For derivative instruments, the total represents the
                    total value
                    of derivative instrument contracts (notional value) within the
                    forward,
                    future and swap portfolio, and not a balance sheet value. The
                    unrealized
                    gain or loss on the instrument at the balance sheet date is included
                    within our financial statements at fair value, and is therefore
                    represented under the “Fair Value”
column.
  127
  Most
          of the floating rate debt accrues interest at TJLP ( *Taxa
          de Juros de Longo Prazo* )
          plus a
          spread. The TJLP is a long-term nominal interest rate fixed by the Brazilian
          government on a quarterly basis. During the period set forth below the
          TJLP
          was:
  **200****6**
                
                **2005**
                
                **2004**
                
                **2003**
                
                **2002**1st
                    Quarter
                
                
                9.00
                
                
                9.75
                
                
                10.00
                
                
                11.00
                
                
                10.002nd
                    Quarter
                
                
                8.15
                
                
                9.75
                
                
                9.75
                
                
                12.00
                
                
                9.503rd
                    Quarter
                
                
                -
                
                
                9.75
                
                
                9.75
                
                
                12.00
                
                
                10.004th
                    Quarter
                
                
                -
                
                
                9.75
                
                
                9.75
                
                
                11.00
                
                
                10.00
  We
          have not experienced, and do not expect to experience, difficulties in
          obtaining
          financing or refinancing existing debt.
  **Foreign
          Exchange Risk**
  We
          are exposed to fluctuations in foreign exchange rate movements because
          a
          significant portion of our Brazilian operations’ debt is denominated in or
          indexed to foreign currencies, particularly the U.S. dollar. In addition,
          a
          significant portion of our operating expenses, in particular those related
          to
          hops, malt and aluminum, are also denominated in or linked to the U.S.
          dollar.
          We enter into derivative financial instruments to manage and reduce the
          impact
          of changes in foreign currency exchange rates in respect of our U.S.
          dollar-denominated debt. From January 1, 2001 until December 31, 2005,
          the
          Brazilian *real* depreciated by 20.8% against the U.S. dollar, and, as of December 31, 2005,
          the
          commercial market rate for purchasing U.S. dollars was R$ 2.34 per U.S.$1.00.
          The U.S. dollar depreciated against the Brazilian *real* by 11.8%
          during 2005.
  Our
          foreign currency exposure gives rise to market risks associated with exchange
          rate movements, mainly against the U.S. dollar. Foreign currency-denominated
          liabilities at December 31, 2005 included debt of R$ 6.408.8
          million.
  128
  **Current
          Exposure**
  As
          of December 31, 2005, derivative activities consisted of foreign currency
          forward contracts, foreign currency swaps and future contracts. The table
          below
          provides information about our significant foreign exchange rate risk sensitive
          instruments as of December 31, 2005. The contract terms of these instruments
          have been categorized by expected maturity dates.
  **Principal
                      Maturity Periods****(1)****2006**
                  
                  **2007**
                  
                  **2008**
                  
                  **2009**
                  
                  **2010**
                  
                  **Thereafter**
                  
                  **Total****(2)**
                  
                  **Fair
                      Value****(2)***(R$
                      in millions, except percentages)***Derivatives
                      Instruments****BM&F
                      DDI Dollar Future**Notional
                      Amount
                  
                  
                  (990.7
                  )
                  
                  88.7
                  
                  
                  617.4
                  
                  
                  105.3
                  
                  
                  21.8
                  
                  
                  (101.8
                  )
                  
                  (259.3
                  )
                  
                  2.6Average
                      Interest Rate
                  
                  
                  5.32
                  %
                  
                  4.54
                  %
                  
                  4.72
                  %
                  
                  5.15
                  %
                  
                  5.13
                  %
                  
                  6.17
                  %**U.S.$
                      x R$ Cross Currency****Interest
                      Rate Swap**Notional
                      Amount
                  
                  
                  1,781.6
                  
                  
                  187.6
                  
                  
                  522.6
                  
                  
                  
                  
                  
                  
                  
                  
                  1,369.5
                  
                  
                  3,861.3
                  
                  
                  (112.5
                  )Average
                      Interest Rate
                  
                  
                  4.43
                  %
                  
                  4.48
                  %
                  
                  6.22
                  %
                  
                  
                  
                  
                  
                  
                  
                  11.59
                  %**C$
                      x U.S.$ Pre Fixed Rate x****Canadian
                      Bankers Acceptance**Notional
                      Amount
                  
                  
                  210.7
                  
                  
                  
                  
                  
                  156.5
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  367.2
                  
                  
                  (5.3
                  )Average
                      Interest Rate
                  
                  
                  5.52
                  %
                  
                  
                  
                  
                  5.28
                  %**C$
                      x U.S.$ Cross Currency****Interest
                      Rate Swap**Notional
                      Amount
                  
                  
                  
                  
                  
                  
                  
                  
                  240.5
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  240.5
                  
                  
                  (85.6
                  )Average
                      Interest Rate
                  
                  
                  
                  
                  
                  
                  
                  
                  6,65
                  %**NDF
                      Argentine Peso x U.S.$**Notional
                      Amount
                  
                  
                  206.0
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  206.0
                  
                  
                  0.1Average
                      Unit Price - Peso
                  
                  
                  3.09**NDF
                      Peru Soles x U.S.$**Notional
                      Amount
                  
                  
                  210.7
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  210.7
                  
                  
                  (1.8
                  )Average
                      Unit Price - Soles
                  
                  
                  3.42**Total**
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  **202.62**
 
 (1)
                Negative
                    notional amounts represent an excess of liabilities over assets
                    at any
                    given moment.(2)
                For
                    cash and debt instruments, total represents the carrying value
                    of those
                    instruments within the balance sheet and is therefore directly
                    comparable
                    with the fair value of the instrument, included within the “Fair Value”
                    column. For derivative instruments, total represents the total
                    value of
                    derivative instrument contracts (notional value) within the forward,
                    future and swap portfolio, and not a balance sheet value. The
                    unrealized
                    gain or loss on the instrument at the balance sheet date is included
                    within our financial statements at fair value and is therefore
                    represented
                    under the “Fair Value” column.
  **Description
          of Securities Other Than Equity Securities**
  Not
          applicable.
 
 129
  **PART
          II**
  **Defaults,
          Dividend Arrearages and Delinquencies**
  Not
          applicable.
  **Material
          Modifications to the Rights of Security Holders and Use of
          Proceeds**
  Not
          applicable.
  **Controls
          and Procedures**
  The
          Company has carried out an evaluation of the effectiveness of the design
          and
          operation of the Company’s disclosure controls and procedures under the
          supervision and with the participation of the Company’s management, which is
          responsible for the management of the internal controls, and who includes
          the
          Chief Executive Officers and Chief Financial Officer. There are inherent
          limitations to the effectiveness of any system of disclosure controls and
          procedures, including the possibility of human error and the circumvention
          or
          overriding of the controls and procedures. Accordingly, even effective
          disclosure controls and procedures can only provide reasonable assurance
          of
          achieving their control objectives. Based upon the Company’s evaluation, as of
          the end date of the period covered by this report, the Chief Executive
          Officers
          and Chief Financial Officer of the Company have concluded that the disclosure
          controls and procedures are (i) effective in ensuring that information
          required
          to be disclosed in the reports that are filed or submitted under the U.S.
          Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
          and reported within the time periods specified in the Commission's rules
          and
          forms and (ii) effective in ensuring that information to be disclosed in
          the
          reports that are filed or submitted under the Exchange Act is accumulated
          and
          communicated to the management of the Company, including the principal
          executive
          and principal financial officers, to allow timely decisions regarding required
          disclosure.
  **Audit
          Committee Financial Expert**
  We
          have relied on the exemption provided for under Rule 10A-3(c) of the
          Exchange Act, as added by Section 301 of the Sarbanes-Oxley Act of 2002,
          which
          enables us to have the *Conselho
          Fiscal* perform
          the duties of an audit committee for the purposes of such Act, to the extent
          permitted by Brazilian law. In accordance with the charter of our *Conselho
          Fiscal* ,
          at
          least one of its members has to fulfill the requirements of the Sarbanes-Oxley
          Act of 2002 for the purposes of qualifying as an audit committee financial
          expert. Accordingly, our *Conselho
          Fiscal* is
          comprised of one "audit committee financial expert" within the meaning
          of this
          Item 16A, namely Mr. Álvaro de Sousa, with an extensive work-related
          finance background, who is “independent” as allowed per Rule 10A-3 (c)(v) of the
          Sarbanes-Oxely Act of 2002.
  **Code
          of Business Conduct**
  We
          have adopted a code of business conduct (as defined under the rules and
          regulations of the SEC) that apply to our principal executive officers,
          principal financial officer and principal accounting officer, among others.
          The
          code became effective in 2003; it was amended on May 2, 2005, and is
          attached to this annual report as an Exhibit. If the provisions of the
          code that
          apply to our principal executive officer, principal financial officer or
          principal accounting officer are amended, or if a waiver is granted, we
          will
          disclose such amendment or waiver.
  130
  **Principal
          Accountant Fees and Services**
  Deloitte
          Touche Tohmatsu Auditores Independentes acted as our independent auditor
          for the
          fiscal year ended December 31, 2005 and 2004. PricewaterhouseCoopers acted
          as
          our independent auditor for the fiscal year ended December 31, 2003. The
          chart below sets forth the total amount billed to us by Deloitte Touche
          Tohmatsu
          Auditores Independentes for services performed in the years 2005 and 2004
          and
          breaks down these amounts by category of service:
  **2005**
                
                **2004*****R$***Audit
                    Fees
                
                
                
                
                
                2,125,927
                
                
                
                
                
                2,241,376Audit-Related
                    Fees
                
                
                
                
                
                1,174,800
                
                
                
                
                
                240,000Tax
                    Fees
                
                
                
                
                
                —
                
                
                
                
                
                —All
                    Other Fees
                
                
                
                
                
                160,699
                
                
                
                
                
                260,445Total
                
                
                
                
                
                3,461,426
                
                
                
                
                
                2,741,821
  **Audit
          Fees**
  Audit
          fees are fees billed for the audit of our annual financial statements and
          for
          the reviews of our quarterly financial statements in connection with statutory
          and regulatory filings or engagements.
  **Audit-Related
          Fees**
  Audit-related
          fees in 2005 and 2004 consisted of fees billed for assurance and related
          services that were reasonably related to the performance of the audit or
          review
          of the Company’s financial statements or that were traditionally performed by
          the external auditor, and include consultations concerning financial and
          tax
          accounting, and reporting standards, and internal control reviews (including
          those related to AmBev’s preparation for the assessment required under Section
          404 of the Sarbanes-Oxley Act).
  **Tax
          Fees**
  During
          2005 and 2004 there is no fees related to services for tax compliance,
          tax
          planning and tax advice.
  **All
          Other Fees**
  All
          other services in 2005 and 2004 include due diligence, other risk management
          advice and analysis, or review of business plans or planning processes
          (but not
          design or implementation).
  **Independent
          Registered Public Accounting Firm**
  **** The
          audited financial statements herein have been audited by Deloitte
          Touche Tohmatsu Auditores Independentes, São Paulo, Brazil, independent
          registered public accounting firm.  Pursuant to the audit firm rotation
          rules introduced by Article 31 of CVM Instruction No. 308/99, we were required
          to replace our prior auditors, PricewaterhouseCoopers Auditores Independentes,
          for purposes of auditing the financial statements to be filed with the
          CVM for
          the year ending December 31, 2004. Deloitte Touche Tohmatsu Auditores
          Independentes performed for the first time the audit of the financial statements
          for the year ending December 31, 2004. The offices of Deloitte Touche Tohmatsu
          Auditores Independentes are located at Rua José Guerra, 127, 04719-030 São
          Paulo, SP, Brazil. They are members of the *Conselho
          Regional de Contabilidade* (Regional Board of Accountants of São Paulo) and their registration number is
          CRC.2.SP.011609/O-8.
  131
  **Pre-Approval
          Policies and Procedures**
  **** We
          have
          adopted pre-approval policies and procedures under which all audit and
          non-audit
          services provided by contracted external auditors must be pre-cleared by
          the *Conselho
          Fiscal* ,
          which
          performs the duties of an audit committee for the purposes of the Sarbanes-Oxley
          Act of 2002, in accordance with Rule 10A-3(c). The *Conselho
          Fiscal* adopts a
          list of services and amount limits for contracting for each external auditor
          under terms included in a Basic List, which is in turn approved by the
          Board of
          Directors. Any services provided from such List are deemed “pre-approved” for
          purposes of the Sarbanes-Oxley Act of 2002. On a quarterly basis, the Board
          of
          Directors and the *Conselho
          Fiscal* will
          receive from the *Chief
          Financial Officer* a
          summary report on the progress of the pre-approved services rendered and
          the
          corresponding fees duly authorized. Any services which are not included
          in the
          Basic List require a prior favorable opinion of our *Conselho
          Fiscal* and the
          approval of our Board of Directors. Our policy also contains a list of
          services
          which cannot be rendered by our external auditors.
  **Exemptions
          from the Listing Standards for Audit Committees**
  **** NYSE
          corporate governance standards require that a listed company have an audit
          committee composed of three independent members that satisfy the independence
          requirements of Rule 10A-3 under the Exchange Act, with a written charter
          that
          addresses certain duties.
  **** The
          Brazilian Corporate Law requires us to have a non-permanent *Conselho
          Fiscal* .
          The *Conselho
          Fiscal* operates
          independently from our management and from our registered independent public
          accounting firm. Its principal function is to examine the financial statements
          of each fiscal year and provide a formal report to our shareholders. We
          maintain
          a permanent *Conselho
          Fiscal* .
          We are
          relying on the exemption provided for in Rule 10A-3(c)(3) and believe that
          our reliance on this exemption will not materially affect the ability of
          the *Conselho
          Fiscal* to act
          independently and to satisfy the other requirements of Rule 10A-3. In accordance
          with the charter of our *Conselho
          Fiscal* ,
          at
          least one of its members has to fulfill the requirements of the Sarbanes-Oxley
          Act of 2002 for the purposes of qualifying as an audit committee financial
          expert. Accordingly, our *Conselho
          Fiscal* is
          comprised of one financial expert, namely Mr. Álvaro de Sousa.
  **Purchases
          of Equity Securities by the Issuer and Affiliated Purchasers**
  **** As
          disclosed under “Major Shareholders—Share Buyback Program”, the Company has
          purchased a number of its shares during the period covered by this
          report.
  **** Below,
          in
          tabular format, is a disclosure of the Company repurchases, including those
          made
          pursuant to publicly announced plans or programs, for the periods
          indicated.
  **** *Preferred
          Shares Repurchases*
  **Period**
                
                **Total**
                  **number**
                  **of
                    shares**
                  **purchased**
                
                **Average**
                  **price**
                  **paid**
                  **per
                    share**
                
                **Total
                    number of shares purchased as part of publicly announced plans
                    or
                    programs(1)**
                
                **Maximum
                    number of shares that may be purchased under the plans or
                    programs(2)**January,
                    2005
                
                
                103,000
                
                
                737.41
                
                
                103,000
                
                
                427,806,005February,
                    2005
                
                
                8,545,569
                
                
                718.11
                
                
                8,545,569
                
                
                419,260,436March,
                    2005
                
                
                180,121,319
                
                
                775.49
                
                
                140,944,836
                
                
                -April,
                    2005
                
                
                9,172,766
                
                
                314.45
                
                
                -
                
                
                -May,
                    2005
                
                
                10,512,064
                
                
                706.75
                
                
                -
                
                
                -June,
                    2005
                
                
                22,755,178
                
                
                680.32
                
                
                -
                
                
                -July,
                    2005
                
                
                22,498,564
                
                
                725.51
                
                
                -
                
                
                -August,
                    2005
                
                
                3,456,445
                
                
                740.10
                
                
                -
                
                
                -September,
                    2005
                
                
                8,283,460
                
                
                779.31
                
                
                -
                
                
                -October,
                    2005
                
                
                9,528,778
                
                
                772.44
                
                
                -
                
                
                -November,
                    2005
                
                
                31,424,898
                
                
                793.14
                
                
                30,290,555
                
                
                1,945,298,361December,
                    2005
                
                
                224,212,793
                
                
                877.11
                
                
                222,718,540
                
                
                1,722,579,821January,
                    2006
                
                
                294,179,743
                
                
                903.54
                
                
                294,179,743
                
                
                1,428,400,078February,
                    2006
                
                
                46,487,835
                
                
                880.34
                
                
                43,369,937
                
                
                1,309,037,451March,
                    2006
                
                
                71,693,104
                
                
                897.97
                
                
                66,217,532
                
                
                1,238,416,661April,
                    2006
                
                
                77,032,519
                
                
                969.32
                
                
                77,032,519
                
                
                1,154,810,263May,
                    2006
                
                
                6,535,926
                
                
                702.06
                
                
                -
                
                
                1,154,810,263June,
                    2006
                
                
                -
                
                
                -
                
                
                -
                
                
                1,154,810,263July,
                    2006
                
                
                229,096,142
                
                
                868.63
                
                
                10,461,660
                
                
                1,143,740,015**Total**
                
                
                **1,258,550,365**
                
                
                **856.67**
                
                
                **893,863,891**
 
 (1)
                    May differ from total number of shares purchased as they do not
                    include
                    all shares acquired from employees under the stock ownership
                    program.(2)
                    Numbers for February 22, 2006 plan includes both Common and Preferred
                    shares.
  132
  *Common
          Shares Repurchases*
  **Period**
                
                **Total**
                  **number**
                  **of
                    shares**
                  **purchased**
                
                **Average**
                  **price**
                  **paid**
                  **per
                    share**
                
                **Total
                    number of shares purchased as part of publicly announced plans
                    or
                    programs(1)**
                
                **Maximum
                    number of shares that may be purchased under the plans or
                    programs(2)**January,
                    2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -February,
                    2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -March,
                    2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -April,
                    2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -May,
                    2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -June,
                    2005
                
                
                2,521,463
                
                
                544.56
                
                
                -
                
                
                -July,
                    2005
                
                
                4,975,420
                
                
                601.19
                
                
                -
                
                
                -August,
                    2005
                
                
                768,433
                
                
                614.73
                
                
                -
                
                
                -September,
                    2005
                
                
                1,571,722
                
                
                658.02
                
                
                -
                
                
                -October,
                    2005
                
                
                3,022,814
                
                
                665.42
                
                
                -
                
                
                -November,
                    2005
                
                
                2,366,713
                
                
                610.04
                
                
                -
                
                
                -December,
                    2005
                
                
                1,642,505
                
                
                757.80
                
                
                -
                
                
                -January,
                    2006
                
                
                269,487
                
                
                785.90
                
                
                -
                
                
                -February,
                    2006
                
                
                10,370,860
                
                
                756.28
                
                
                9,701,569
                
                
                1,309,037,451March,
                    2006
                
                
                5,498,372
                
                
                767.91
                
                
                4,403,258
                
                
                1,238,416,661April,
                    2006
                
                
                6,573,879
                
                
                847.65
                
                
                6,573,879
                
                
                1,154,810,263May,
                    2006
                
                
                1,034,650
                
                
                689.93
                
                
                -
                
                
                1,154,810,263June,
                    2006
                
                
                -
                
                
                -
                
                
                -
                
                
                1,154,810,263July,
                    2006
                
                
                873,019
                
                
                722.01
                
                
                608,588
                
                
                1,143,740,015**Total**
                
                
                **41,489,337**
                
                
                **717.41**
                
                
                **21,287,294**
 
 (1)
                    May differ from total number of shares purchased as they do not
                    include
                    all shares acquired from employees under the stock ownership
                    program.(2)
                    Numbers for February 22, 2006 plan includes both Common and Preferred
                    shares.
  The
          publicly announced programs referenced in the above tables are the
          following:
 
 **Plan
                    Begin**
                
                **Period**
                
                **Common
                    or Preferred shares**
                
                **Maximum
                    number of shares**
                
                **Maximum
                    amount (R$ thousand)**September
                    14, 2004
                
                
                365
                    days
                
                
                Preferred
                
                
                1,000,000,000
                
                
                500,000November
                    7, 2005
                
                
                365
                    days
                
                
                Preferred
                
                
                1,975,588,915
                
                
                500,000February
                    22, 2006
                
                
                180
                    days
                
                
                Common
                    and Preferred
                
                
                1,362,108,957
                
                
                500,000August
                    7, 2006
                
                
                360
                    days
                
                
                Common
                    and Preferred
                
                
                1,040,122,056
                
                
                1,000,000
  Shares
          not purchased under publicly announced programs include those purchased
          from
          employees when no publicly announced program was in place and those bought
          from
          employees that were dismissed.
  133




**Financial
          Statements**
 ***Companhia
                      de Bebidas***
                    ***das
                      Américas - AmBev***
                    *Consolidated
                      Financial Statements as of**December
                      31, 2005 and 2004 and for the Years then Ended and Report of
                      Independent
                      Registered Public**Accounting
                      Firm*
                    
                    Deloitte
                      Touche Tohmatsu Auditores
                      Independentes
  134
  REPORT
            OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
            the
            Board of Directors and Stockholders of
 Companhia
            de Bebidas das Américas - AmBev
 São
            Paulo - SP - Brazil
  1.
                  We
                      have audited the consolidated balance sheets of Companhia de
                      Bebidas das
                      Américas - AmBev and its subsidiaries (the “Company”) as of December 31,
                      2005 and 2004, and the related consolidated statements of income,
                      changes
                      in stockholders’ equity, changes in financial position, and cash flows for
                      the years then ended, all expressed in Brazilian reais. These
                      financial
                      statements are the responsibility of Company’s management. Our
                      responsibility is to express an opinion on these financial
                      statements
                      based on our audits. We did not audit the financial statements
                      of Labatt
                      Brewing Company Limited (“Labatt”) (a wholly-owned subsidiary of AmBev),
                      which statements reflect total assets constituting 7.3 percent
                      and 8.6
                      percent of consolidated total assets as of December 31, 2005
                      and 2004,
                      respectively and total revenues constituting 24.9 percent and
                      13.0 percent
                      of consolidated total revenues for the years ended December
                      31, 2005 and
                      2004, respectively. Such financial statements were audited
                      by other
                      auditors whose report has been furnished to us, and our opinion,
                      insofar
                      as it relates to the amounts included for such subsidiary,
                      is based solely
                      on the report of such other
                      auditors.
  2.
                  We
                      conducted our audits in accordance with standards of the Public
                      Company
                      Accounting Oversight Board (United States). Those standards
                      require that
                      we plan and perform the audit to obtain reasonable assurance
                      about whether
                      the financial statements are free of material misstatement.
                      The Company is
                      not required to have, nor were we engaged to perform, an audit
                      of its
                      internal control over financial reporting. Our audits included
                      consideration of internal control over financial reporting
                      as a basis for
                      designing audit procedures that are appropriate in the circumstances,
                      but
                      not for the purpose of expressing an opinion on the effectiveness
                      of the
                      Company’s internal control over financial reporting. Accordingly, we
                      express no such opinion. An audit also includes examining,
                      on a test
                      basis, evidence supporting the amounts and disclosures in the
                      financial
                      statements, assessing the accounting principles used and significant
                      estimates made by management, as well as evaluating the overall
                      financial
                      statements presentation. We believe that our audits and the
                      report of
                      other auditors provide a reasonable basis for our
                      opinion.
  3.
                  In
                      our opinion, based on our audits and the report of other auditors,
                      such
                      consolidated financial statements present fairly, in all material
                      respects, the financial position of Companhia de Bebidas das
                      Américas -
                      AmBev and subsidiaries as of December 31, 2005 and 2004, and
                      the results
                      of their operations, changes in stockholders’ equity, their financial
                      position and their cash flow for the years then ended in conformity
                      with
                      accounting practices adopted in
                      Brazil.
  F-1
  4.
                  Accounting
                      practices adopted in Brazil vary in certain significant respects
                      from
                      accounting principles generally accepted in the United States
                      of America.
                      The Company has presented the nature and effect of such differences
                      in
                      Note 23 to the consolidated financial
                      statements.
  5.
                  As
                      discussed in Note 26, the reconciliation of accounting practices
                      adopted
                      in Brazil with accounting principles generally accepted in
                      the United
                      States of America (US GAAP) and the condensed financial information
                      prepared in accordance with US GAAP disclosed in Note 23 have
                      been
                      restated.
  DELOITTE
            TOUCHE TOHMATSU
 Auditores
            Independentes
  São
            Paulo
            February 13, 2006, except for Note 23, as to which the date is March
            25, 2006,
            except for Note 25, as to which the date is August 9, 2006, and except
            for Note
            26, as to which the date is July 4, 2007.
  F-2
  REPORT
            OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
            the
            Board of Directors of
 Labatt
            Brewing Company Limited
 Toronto
            - Canada
  We
            have
            audited the accompanying balance sheets of Labatt Brewing Company Limited
            (the
“Company”) as of December 31, 2005 and 2004, and the related statements of
            operations, deficit and contributed surplus and changes in financial
            position
            for the year ended December 31, 2005 and the period from August 28, 2004
            to
            December 31, 2004, all expressed in Canadian dollars. These financial
            statements
            are the responsibility of Company’s management. Our responsibility is to express
            an opinion on these financial statements based on our audits.
  We
            conducted our audits in accordance with the standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            financial
            statements are free of material misstatement. The Company is not required
            to
            have, nor were we engaged to perform, an audit of its internal control
            over
            financial reporting. Our audit included consideration of internal control
            over
            financial reporting as a basis for designing audit procedures that appropriate
            in the circumstances, but not for the purposes of expressing an opinion
            on the
            effectiveness of the Company’s internal control over financial reporting.
            Accordingly, we express no such opinion. An audit includes examining,
            on a test
            basis, evidence supporting the amounts and disclosures in the financial
            statements, assessing the accounting principles used and significant
            estimates
            made by management, as well as evaluating the overall financial statement
            presentation. We believe that our audits provide a reasonable basis for
            our
            opinion.
  In
            our
            opinion, such financial statements presents fairly, in all material respects,
            the financial position of the Company as of December 31, 2005 and 2004,
            and the
            results of its operations and changes in the stockholders’ equity for the year
            ended December 31, 2005 and the period from August 28, 2004 to December
            31,
            2004, in conformity with accounting practices adopted in Brazil.
  Accounting
            practices adopted in Brazil vary in certain significant respects from
            accounting
            principles generally accepted in the United States of America (U.S. GAAP).
            The
            Company has presented the nature and effect of such differences in Note
            20 to
            the financial statements.
  /s/
            KPMG,
            LLP
 
 
 Chartered
            Accountants
 Toronto
            -
            Canada
  February
              3, 2006, except as to note 22 which is as of July 4, 2007
  F-3
  REPORT
            OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
            the
            Board of Directors and Shareholders
 Companhia
            de Bebidas das Américas - AmBev
  In
            our
            opinion, the accompanying consolidated statements of income, of changes
            in
            shareholders' equity, of changes in financial position and of cash flows
            present
            fairly, in all material respects, the results of operations, changes
            in
            financial position and cash flows of Companhia de Bebidas das Américas - AmBev
            and its subsidiaries for the year ended December 31, 2003, in conformity
            with
            accounting practices adopted in Brazil. These financial statements are
            the
            responsibility of the Company's management; our responsibility is to
            express an
            opinion on these financial statements based on our audit. We conducted
            our audit
            in accordance with auditing standards generally accepted in Brazil and
            the
            standards of the Public Company Accounting Oversight Board (United States).
            Those standards require that we plan and perform the audit to obtain
            reasonable
            assurance about whether the financial statements are free of material
            misstatement. An audit includes examining, on a test basis, evidence
            supporting
            the amounts and disclosures in the financial statements, assessing the
            accounting principles used and significant estimates made by management,
            and
            evaluating the overall financial statement presentation. We believe that
            our
            audit provides a reasonable basis for our opinion.
  Accounting
            practices adopted in Brazil vary in certain significant respects from
            accounting
            principles generally accepted in the United States of America. Information
            relating to the nature and effect of such differences is presented in
            Note 23.
  /s/PricewaterhouseCoopers São
            Paulo, February 12, 2004, except as to
 Auditores
            Independentes    Note
            1,
            as to which the date is March 1, 2004
  F-4
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
            BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004
 (Expressed
            in millions of Brazilian reais)
 
 ASSETS
                      
                      2005
                      
                      2004CURRENT
                          ASSETSCash
                          and cash equivalents
                      
                      
                      837.3
                      
                      
                      1,290.9Short-term
                          investments
                      
                      
                      259.0
                      
                      
                      214.5Trade
                          accounts receivable, net
                      
                      
                      1,331.8
                      
                      
                      1,086.3Recoverable
                          taxes
                      
                      
                      545.5
                      
                      
                      654.3Inventories
                      
                      
                      1,178.1
                      
                      
                      1,380.9Other
                      
                      
                      779.6
                      
                      
                      752.8Total
                          current assets
                      
                      
                      4,931.3
                      
                      
                      5,379.7NON-CURRENT
                          ASSETSDeferred
                          income tax
                      
                      
                      2,042.0
                      
                      
                      2,216.6Judicial
                          deposits and tax incentives
                      
                      
                      522.5
                      
                      
                      419.1Assets
                          held for sale
                      
                      
                      104.5
                      
                      
                      113.8Advances
                          to employees for purchase of shares
                      
                      
                      114.9
                      
                      
                      175.2Other
                      
                      
                      376.1
                      
                      
                      453.7Total
                          non-current assets
                      
                      
                      3,160.0
                      
                      
                      3,378.4PERMANENT
                          ASSETSInvestmentsGoodwill
                          and negative goodwill
                      
                      
                      16,727.1
                      
                      
                      18,172.2Other
                      
                      
                      36.5
                      
                      
                      46.5Property,
                          plant and equipment
                      
                      
                      5,404.6
                      
                      
                      5,531.7Deferred
                          charges
                      
                      
                      3.233.3
                      
                      
                      294.1Total
                          permanent assets
                      
                      
                      25,401.5
                      
                      
                      24,044.5TOTAL
                      
                      
                      33,492.8
                      
                      
                      32,802.6
  LIABILITIES
                          AND SHAREHOLDERS’ EQUITY
                      
                      2005
                      
                      2004CURRENT
                          LIABILITIESSuppliers
                      
                      
                      1,065.4
                      
                      
                      1,047.7Payroll
                          and related charges
                      
                      
                      447.7
                      
                      
                      378.2Loans
                          and financings
                      
                      
                      1,209.4
                      
                      
                      3,443.1Income
                          taxes payable
                      
                      
                      244.5
                      
                      
                      650.6Other
                          taxes payable
                      
                      
                      1,030.8
                      
                      
                      983.3Unrealized
                          loss on derivatives
                      
                      
                      129.8
                      
                      
                      409.1Dividends
                          payable
                      
                      
                      25.9
                      
                      
                      998.9Other
                      
                      
                      898.8
                      
                      
                      860.8Total
                          current liabilities
                      
                      
                      5,052.3
                      
                      
                      8,771.7LONG-TERM
                          LIABILITIESLoans
                          and financings
                      
                      
                      5,994.2
                      
                      
                      4,367.6Accrued
                          liability for contingencies
                      
                      
                      1,128.2
                      
                      
                      1,242.9Sales
                          tax deferrals
                      
                      
                      352.6
                      
                      
                      275.7Other
                      
                      
                      825.7
                      
                      
                      936.3Total
                          long term liabilities
                      
                      
                      8,300.7
                      
                      
                      6,822.5DEFERRED
                          INCOME
                      
                      
                      149.9
                      
                      
                      -MINORITY
                          INTEREST
                      
                      
                      122.6
                      
                      
                      212.5SHAREHOLDERS’
                          EQUITYSubscribed
                          and paid-in capital
                      
                      
                      5,691.4
                      
                      
                      4,742.8Capital
                          reserve
                      
                      
                      13,889.5
                      
                      
                      12,859.4Revenue
                          reserves
                      
                      
                      679.8
                      
                      
                      433.7Treasury
                          shares
                      
                      
                      (393.4
                      )
                      
                      (1,040.0
                      )Total
                          shareholders’ equity
                      
                      
                      19,867.3
                      
                      
                      16,995.9TOTAL
                      
                      
                      33,492.8
                      
                      
                      32,802.6
 The
            accompanying notes are an integral part of the consolidated financial
            statements.
  F-5
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS -
            AMBEV
  CONSOLIDATED
            STATEMENTS OF INCOME
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 (Expressed
            in millions of Brazilian reais, except for earnings per thousand
            shares)
 
 2005
                  
                  2004
                  
                  2003GROSS
                      REVENUES
                  
                  
                  28,878.7
                  
                  
                  23,297.6
                  
                  
                  17,143.5Value-added
                      and other taxes, discounts and returns
                  
                  
                  (12,920.1
                  )
                  
                  (11,290.8
                  )
                  
                  (8,459.7
                  )NET
                      SALES
                  
                  
                  15,958.6
                  
                  
                  12,006.8
                  
                  
                  8,683.8Cost
                      of sales
                  
                  
                  (5,742.3
                  )
                  
                  (4,780.5
                  )
                  
                  (4,044.2
                  )GROSS
                      PROFIT
                  
                  
                  10,216.3
                  
                  
                  7,226.3
                  
                  
                  4,639.6OPERATING
                      INCOME (EXPENSES)Selling
                      and marketing
                  
                  
                  (3,499.9
                  )
                  
                  (2,451.7
                  )
                  
                  (1,495.7
                  )General
                      and administrative
                  
                  
                  (830.7
                  )
                  
                  (617.9
                  )
                  
                  (417.9
                  )Depreciation
                      and amortization
                  
                  
                  (843.0
                  )
                  
                  (541.5
                  )
                  
                  (420.0
                  )Provision
                      for contingencies and other
                  
                  
                  (71.5
                  )
                  
                  (260.2
                  )
                  
                  (187.9
                  )Financial
                      income (expenses), net
                  
                  
                  (1,086.7
                  )
                  
                  (776.3
                  )
                  
                  93.1Other
                      operating expenses, net
                  
                  
                  (1,075.4
                  )
                  
                  (420.9
                  )
                  
                  (240.1
                  )Equity
                      in results of affiliates
                  
                  
                  2.0
                  
                  
                  5.6
                  
                  
                  (6.2
                  )(7,405.2
                  )
                  
                  (5,062.9
                  )
                  
                  (2,674.7
                  )OPERATING
                      INCOME
                  
                  
                  2,811.1
                  
                  
                  2,163.4
                  
                  
                  1,964.9Non-operating
                      expenses, net
                  
                  
                  (234.3
                  )
                  
                  (333.9
                  )
                  
                  (100.7
                  )INCOME
                      BEFORE INCOME TAXES, PROFIT SHARING AND MINORITY INTEREST
                  
                  
                  2,576.8
                  
                  
                  1,829.5
                  
                  
                  1,864.2Income
                      tax and social contribution benefit (expense)Current
                  
                  
                  (757.1
                  )
                  
                  (740.6
                  )
                  
                  (624.4
                  )Deferred
                  
                  
                  (88.0
                  )
                  
                  228.8
                  
                  
                  198.3INCOME
                      BEFORE PROFIT SHARING AND MINORITY INTEREST
                  
                  
                  1,731.7
                  
                  
                  1,317.7
                  
                  
                  1,438.1Employee
                      and management profit sharing
                  
                  
                  (202.8
                  )
                  
                  (152.4
                  )
                  
                  (23.6
                  )INCOME
                      BEFORE MINORITY INTEREST
                  
                  
                  1,528.9
                  
                  
                  1,165.3
                  
                  
                  1,414.5Minority
                      interest
                  
                  
                  16.8
                  
                  
                  (3.8
                  )
                  
                  (2.9
                  )NET
                      INCOME
                  
                  
                  1,545.7
                  
                  
                  1,161.5
                  
                  
                  1,411.6NUMBER
                      OF SHARES OUTSTANDING AT YEAR-END, EXCLUDING TREASURY SHARES
                      (THOUSANDS)
                  
                  
                  65,346,214
                  
                  
                  54,627,407
                  
                  
                  37,912,634EARNINGS
                      PER THOUSAND SHARES AT YEAR END (WHOLE*REAIS*)
                      -
                      R$
                  
                  
                  23.65
                  
                  
                  21.26
                  
                  
                  37.23
  The
            accompanying notes are an integral part of the consolidated financial
            statements.
  F-6
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
            STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 (Expressed
            in millions of Brazilian reais)
 
 Revenue reservesSubscribed
                    and paid-in
                    capital
                  
                  Capital
                    reserve
                  
                  Legal
                    reserve
                  
                  Future
                    capital
                    increase
                  
                  Statutory
                    investments
                  
                  Treasury
                    shares
                  
                  Retained
                    earnings
                  
                  TotalBALANCES
                      AT DECEMBER 31, 2002
                  
                  
                  3,046.2
                  
                  
                  16.6
                  
                  
                  138.1
                  
                  
                  1,033.9
                  
                  
                  75.4
                  
                  
                  (180.6
                  )
                  
                  -
                  
                  
                  4,129.6Employee
                      stock ownership plan purchases
                  
                  
                  77.4
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  77.4Subscription
                      of stock warrants
                  
                  
                  0.5
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  0.5Repurchase
                      of own shares for treasury
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (312.5
                  )
                  
                  -
                  
                  
                  (312.5
                  )Cancellation
                      of treasury shares
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (154.6
                  )
                  
                  -
                  
                  
                  154.6
                  
                  
                  -
                  
                  
                  -Transfer
                      of reserves
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (853.2
                  )
                  
                  853.2
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Net
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,411.6
                  
                  
                  1,411.6Appropriation
                      of net incomeLegal
                      reserve
                  
                  
                  -
                  
                  
                  -
                  
                  
                  70.6
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (70.6
                  )
                  
                  -Interim
                      dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (717.7
                  )
                  
                  (717.7
                  )Supplemental
                      dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (280.7
                  )
                  
                  (280.7
                  )Revenue
                      reserve
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  342.6
                  
                  
                  -
                  
                  
                  (342.6
                  )
                  
                  -BALANCES
                      AT DECEMBER 31, 2003
                  
                  
                  3,124.1
                  
                  
                  16.6
                  
                  
                  208.7
                  
                  
                  26.1
                  
                  
                  1,271.2
                  
                  
                  (338.5
                  )
                  
                  -
                  
                  
                  4,308.2Employee
                      stock ownership plan purchases
                  
                  
                  18.0
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  18.0Capital
                      increase upon incorporation of Labatt
                  
                  
                  1,600.7
                  
                  
                  12,840.3
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  14,441.0Repurchase
                      of own shares for treasury
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,609.6
                  )
                  
                  -
                  
                  
                  (1,609.6
                  )Premium
                      on stock option sold
                  
                  
                  -
                  
                  
                  2.5
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2.5Cancellation
                      of treasury shares
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (26.1
                  )
                  
                  (882.0
                  )
                  
                  908.1
                  
                  
                  -
                  
                  
                  -Net
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,161.5
                  
                  
                  1,161.5Appropriation
                      of net income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (164.2
                  )
                  
                  -
                  
                  
                  164.2
                  
                  
                  -Interim
                      dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (344.4
                  )
                  
                  (344.4
                  )Supplemental
                      dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (982.7
                  )
                  
                  (982.7
                  )Dividends
                      and interest attributed to shareholders’ equity prescribed
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1.4
                  
                  
                  1.4BALANCES
                      AT DECEMBER 31, 2004
                  
                  
                  4,742.8
                  
                  
                  12,859.4
                  
                  
                  208.7
                  
                  
                  -
                  
                  
                  225.0
                  
                  
                  (1,040.0
                  )
                  
                  -
                  
                  
                  16,995.9Capital
                      increase upon capitalization of reserves
                  
                  
                  948.6
                  
                  
                  (948.6
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Downstream
                      merger - InBev Brasil
                  
                  
                  -
                  
                  
                  2,883.3
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,883,3Repurchase
                      of own shares for treasury
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (437.3
                  )
                  
                  -
                  
                  
                  (437.3
                  )Cancellation
                      of treasury shares
                  
                  
                  -
                  
                  
                  (868.1
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  868.1
                  
                  
                  -
                  
                  
                  -Transfer
                      of treasury shares to stock
                    ownership
                      plan
                  
                  
                  -
                  
                  
                  (94.4
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  192.5
                  
                  
                  -
                  
                  
                  98.1Disposal
                      of treasury shares
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  23.3
                  
                  
                  -
                  
                  
                  23.3Subsidy
                      of financing and fiscal incentives
                  
                  
                  -
                  
                  
                  57.9
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  57.9Net
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,545.7
                  
                  
                  1,545.7Appropriation
                      of net incomeStatutory
                      reserve
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  246.1
                  
                  
                  -
                  
                  
                  (246.1
                  )
                  
                  -Interim
                      dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (556.2
                  )
                  
                  (556.2
                  )Interim
                      interest attributed to shareholders’ equity
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (744.0
                  )
                  
                  (744.0
                  )Dividends
                      and interest attributed to shareholders’ equity prescribed
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  0.6
                  
                  
                  0.6BALANCES
                      AT DECEMBER 31, 2005
                  
                  
                  5,691.4
                  
                  
                  13,889.5
                  
                  
                  208.7
                  
                  
                  -
                  
                  
                  471.1
                  
                  
                  (393.4
                  )
                  
                  -
                  
                  
                  19,867.3
  The
            accompanying notes are an integral part of the consolidated financial
            statements.
  F-7
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  STATEMENTS
            OF CHANGES IN FINANCIAL POSITION
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 (Expressed
            in millions of Brazilian reais)
 
 2005
                  
                  2004
                  
                  2003FINANCIAL
                      RESOURCES WERE PROVIDED BYFrom
                      operations:Net
                      income
                  
                  
                  1,545.7
                  
                  
                  1,161.5
                  
                  
                  1,411.6Items
                      not affecting working capital:Equity
                      in results of affiliates
                  
                  
                  (2.0
                  )
                  
                  (5.6
                  )
                  
                  6.2Deferred
                      income tax and social contribution
                  
                  
                  88.0
                  
                  
                  (228.8
                  )
                  
                  (198.3
                  )Amortization
                      of goodwill and negative goodwill, net
                  
                  
                  1,343.0
                  
                  
                  803.6
                  
                  
                  252.4Gain
                      on the settlement of tax incentives
                  
                  
                  (28.3
                  )
                  
                  (21.9
                  )
                  
                  (16.6
                  )Depreciation
                      of property, plant and equipment and amortization of deferred
                      charges
                  
                  
                  1,262.6
                  
                  
                  922.2
                  
                  
                  766.3Accrued
                      liability for contingencies and other
                  
                  
                  71.5
                  
                  
                  260.1
                  
                  
                  187.9Interest
                      expense on accrued liability for contingencies
                  
                  
                  52.7
                  
                  
                  49.8
                  
                  
                  59.8Financial
                      charges on long-term loans, net
                  
                  
                  (501.2
                  )
                  
                  278.0
                  
                  
                  (496.6
                  )Foreign
                      exchange loss (gain) on subsidiaries abroad
                  
                  
                  289.3
                  
                  
                  (213.8
                  )
                  
                  367.3Loss
                      arising from changes in holdings in subsidiaries
                  
                  
                  64.8
                  
                  
                  80.7
                  
                  
                  33.3Minority
                      interest
                  
                  
                  (16.9
                  )
                  
                  3.8
                  
                  
                  2.9Net
                      book value of disposals of property, plant and equipment and
                      investments
                  
                  
                  150.4
                  
                  
                  168.7
                  
                  
                  73.8Interest
                      and charges on advances to employees for purchase of
                      shares
                  
                  
                  (13.3
                  )
                  
                  (41.9
                  )
                  
                  (47.7
                  )Provision
                      for losses on permanent assets
                  
                  
                  116.8
                  
                  
                  (6.7
                  )
                  
                  58.7Total
                      from operations
                  
                  
                  4,423.1
                  
                  
                  3,209.7
                  
                  
                  2,461.0From
                      shareholders:Employee
                      stock ownership plan purchases
                  
                  
                  -
                  
                  
                  18.0
                  
                  
                  77.4Subscription
                      of stock warrants
                  
                  
                  -
                  
                  
                  -
                  
                  
                  0.5Premium
                      on the placement of options to repurchase own shares
                  
                  
                  -
                  
                  
                  2.6
                  
                  
                  -Changes
                      in the capital of minority shareholders
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4.8Disposal
                      of treasury shares
                  
                  
                  132.5
                  
                  
                  -
                  
                  
                  -Advances
                      to employees for the purchase of shares
                  
                  
                  73.3
                  
                  
                  101.2
                  
                  
                  91.3From
                      third parties:Increase
                      in long-term liabilities and decrease in non-current
                      assetsLoans
                      and financings
                  
                  
                  2,233.7
                  
                  
                  -
                  
                  
                  295.7Sales
                      tax deferrals
                  
                  
                  115.5
                  
                  
                  167.9
                  
                  
                  57.3Deferred
                      charge
                  
                  
                  12.0
                  
                  
                  -
                  
                  
                  -Other
                      accounts receivable
                  
                  
                  78.6
                  
                  
                  -
                  
                  
                  44.1Others
                  
                  
                  0.5
                  
                  
                  17.3
                  
                  
                  -Total
                      working capital funds provided
                  
                  
                  7,069.2
                  
                  
                  3,516.7
                  
                  
                  3,032.1
  (Continues)
  F-8
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  STATEMENTS
            OF CHANGES IN FINANCIAL POSITION
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 (Expressed
            in millions of Brazilian reais) (Continuation)
 
 2005
                  
                  2004
                  
                  2003FINANCIAL
                      RESOURCES WERE USED FORIncrease
                      in non-current assets and decrease in long-term
                      liabilities:Restricted
                      deposits for legal proceedings
                  
                  
                  72.2
                  
                  
                  52.7
                  
                  
                  84.0Receivables
                      from proportionally consolidated companies
                  
                  
                  8.2
                  
                  
                  5.9
                  
                  
                  14.5Recoverable
                      taxes
                  
                  
                  8.3
                  
                  
                  20.7
                  
                  
                  11.5Other
                      assets
                  
                  
                  4.3
                  
                  
                  -
                  
                  
                  9.7Accrued
                      liability for contingencies
                  
                  
                  224.1
                  
                  
                  87.0
                  
                  
                  123.8Other
                      liabilities
                  
                  
                  30.0
                  
                  
                  71.9
                  
                  
                  98.3Permanent
                      assets:Investments
                  
                  
                  190.4
                  
                  
                  345.9
                  
                  
                  2,100.6Property,
                      plant and equipment
                  
                  
                  1,169.4
                  
                  
                  1,267.2
                  
                  
                  862.2Deferred
                      charges
                  
                  
                  265.4
                  
                  
                  101.9
                  
                  
                  91.2Repurchase
                      of own shares for treasury
                  
                  
                  437.3
                  
                  
                  1,609.6
                  
                  
                  311.9Increase
                      of minority interest in subsidiaries
                  
                  
                  -
                  
                  
                  114.8
                  
                  
                  277.6Proposed
                      and declared dividends
                  
                  
                  1,300.3
                  
                  
                  1,394.1
                  
                  
                  1,004.0Change
                      in the capital of minority shareholders
                  
                  
                  88.3
                  
                  
                  31.9
                  
                  
                  -Financings
                  
                  
                  -
                  
                  
                  2,585.7
                  
                  
                  -Total
                      working capital funds used
                  
                  
                  3,798.2
                  
                  
                  7,689.3
                  
                  
                  4,989.3INCREASE
                      (DECREASE) IN WORKING CAPITAL
                  
                  
                  3,271.0
                  
                  
                  (4,172.6
                  )
                  
                  (1,957.2
                  )REPRESENTED
                      BYCurrent
                      assets:At
                      the end of year
                  
                  
                  4,931.3
                  
                  
                  5,379.7
                  
                  
                  5,500.6At
                      the beginning of year
                  
                  
                  5,379.7
                  
                  
                  5,500.6
                  
                  
                  5,571.5(448.4
                  )
                  
                  (120.9
                  )
                  
                  (70.9
                  )Current
                      liabilitiesAt
                      end of year
                  
                  
                  5,052.3
                  
                  
                  8,771.7
                  
                  
                  4,720.0At
                      beginning of year
                  
                  
                  8,771.7
                  
                  
                  4,720.0
                  
                  
                  2,833.7(3,719.4
                  )
                  
                  4,051.7
                  
                  
                  1,886.3INCREASE
                      (DECREASE) IN WORKING CAPITAL
                  
                  
                  3,271.0
                  
                  
                  4,172.6
                  
                  
                  (1,957.2
                  )
  The
            accompanying notes are an integral part of the consolidated financial
            statements.
  F-9
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
            STATEMENTS OF CASH FLOWS
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 (Expressed
            in millions of Brazilian reais)
 
 2005
                  
                  2004
                  
                  2003CASH
                      FLOWS FROM OPERATING ACTIVITIESNet
                      income
                  
                  
                  1,545.7
                  
                  
                  1,161.5
                  
                  
                  1,411.6Adjustments
                      to net income:Deferred
                      income tax and social contribution
                  
                  
                  88.0
                  
                  
                  (228.8
                  )
                  
                  (198.3
                  )Amortization
                      of goodwill and negative goodwill, net
                  
                  
                  1,343.0
                  
                  
                  803.6
                  
                  
                  252.4Depreciation
                      of property, plant and equipment and amortization of deferred
                      charges
                  
                  
                  1,262.6
                  
                  
                  922.2
                  
                  
                  766.3Accrued
                      liabilities for contingencies and other
                  
                  
                  71.5
                  
                  
                  260.2
                  
                  
                  187.9Interest
                      expense on accrued liability for contingencies
                  
                  
                  52.7
                  
                  
                  49.8
                  
                  
                  59.8Gain
                      on the settlement of tax incentives
                  
                  
                  (28.3
                  )
                  
                  (21.9
                  )
                  
                  (16.6
                  )Provision
                      for losses on inventories and permanent assets
                  
                  
                  58.6
                  
                  
                  (6.5
                  )
                  
                  64.6Provision
                      for restructuring
                  
                  
                  114.9
                  
                  
                  182.7
                  
                  
                  -Unrealized
                      losses (gains) under derivatives
                  
                  
                  (239.5
                  )
                  
                  407.3
                  
                  
                  46.9Interest
                      and charges on advances to employees for purchase of
                      shares
                  
                  
                  (13.3
                  )
                  
                  (41.9
                  )
                  
                  (47.7
                  )Interest
                      and charges on taxes and contributions
                  
                  
                  5.2
                  
                  
                  (5.1
                  )
                  
                  (43.5
                  )Interest
                      and foreign exchange losses (gains) on loans, net
                  
                  
                  281.0
                  
                  
                  329.2
                  
                  
                  (40.1
                  )Unrealized
                      exchange rate variation and gains on financial assets
                  
                  
                  -
                  
                  
                  37.1
                  
                  
                  183.3Loss
                      on disposal of property, plant and equipment, net
                  
                  
                  102.5
                  
                  
                  116.3
                  
                  
                  41.3Loss
                      arising from changes in holdings in subsidiaries
                  
                  
                  64.8
                  
                  
                  80.8
                  
                  
                  33.3Foreign
                      exchange gains on subsidiaries abroad not affecting cash,
                      net
                  
                  
                  (67.6
                  )
                  
                  (355.6
                  )
                  
                  203.5Minority
                      interest
                  
                  
                  (16.8
                  )
                  
                  3.8
                  
                  
                  2.9Equity
                      in results of affiliates
                  
                  
                  (2.0
                  )
                  
                  (5.6
                  )
                  
                  6.2Decrease
                      (increase) in assets:Trade
                      accounts receivable, net
                  
                  
                  (246.9
                  )
                  
                  (141.4
                  )
                  
                  (12.8
                  )Recoverable
                      taxes
                  
                  
                  87.1
                  
                  
                  (241.8
                  )
                  
                  (253.2
                  )Inventories
                  
                  
                  93.2
                  
                  
                  (199.1
                  )
                  
                  (48.6
                  )Restricted
                      deposits for legal proceedings
                  
                  
                  (130.0
                  )
                  
                  (50.7
                  )
                  
                  (102.9
                  )Other
                  
                  
                  106.1
                  
                  
                  (105.9
                  )
                  
                  (167.2
                  )Increase
                      (decrease) in liabilities:Suppliers
                  
                  
                  1.1
                  
                  
                  110.0
                  
                  
                  (14.1
                  )Payroll
                      and related charges
                  
                  
                  118.0
                  
                  
                  188.5
                  
                  
                  (86.4
                  )Taxes
                      on income payable
                  
                  
                  (383.1
                  )
                  
                  175.3
                  
                  
                  491.3Accrued
                      liability for contingencies
                  
                  
                  (101.6
                  )
                  
                  (88.0
                  )
                  
                  (104.8
                  )Other
                  
                  
                  (17.3
                  )
                  
                  82.7
                  
                  
                  (87.5
                  )Net
                      cash provided by operating activities
                  
                  
                  4,149.6
                  
                  
                  3,418.7
                  
                  
                  2,527.6
  (Continues)
  F-10
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
            STATEMENTS OF CASH FLOWS
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 (Expressed
            in millions of Brazilian reais) (Continuation)
 
 2005
                  
                  2004
                  
                  2003CASH
                      FLOWS FROM INVESTING ACTIVITIESShort-term
                      investments (maturity over 90 days)
                  
                  
                  (52.4
                  )
                  
                  1,322.2
                  
                  
                  423.1Investments
                      in affiliates and subsidiaries, net of cash acquired
                  
                  
                  (97.3
                  )
                  
                  (170.3
                  )
                  
                  (1,745.3
                  )Securities
                      and collateral
                  
                  
                  (15.4
                  )
                  
                  27.2
                  
                  
                  228.6Acquisitions
                      of property, plant and equipment
                  
                  
                  (1,369.5
                  )
                  
                  (1,273.7
                  )
                  
                  (862.2
                  )Proceeds
                      from disposal of property, plant and equipment
                  
                  
                  49.6
                  
                  
                  52.4
                  
                  
                  32.4Expenditures
                      on deferred charges
                  
                  
                  (47.9
                  )
                  
                  (101.9
                  )
                  
                  (91.3
                  )Repurchase
                      of own Shares by affiliated companies
                  
                  
                  (87.4
                  )
                  
                  (179.3
                  )
                  
                  -Pay-off
                      of investments
                  
                  
                  1.0
                  
                  
                  0.5
                  
                  
                  -Cash
                      in the subsidiary’s initial consolidation
                  
                  
                  -
                  
                  
                  433.6
                  
                  
                  -Net
                      cash provided by (used in) investing activities
                  
                  
                  (1,619.3
                  )
                  
                  110.7
                  
                  
                  (2,014.7
                  )CASH
                      FLOWS FROM FINANCING ACTIVITIESLoans
                      and financings:Issuances
                  
                  
                  8,917.5
                  
                  
                  6,152.2
                  
                  
                  3,359.2Repayments,
                      including interest
                  
                  
                  (9,361.1
                  )
                  
                  (7,466.5
                  )
                  
                  (2,510.1
                  )Capital
                      subscriptions
                  
                  
                  -
                  
                  
                  15.6
                  
                  
                  4.6Repurchase
                      of own shares for treasury
                  
                  
                  (363.1
                  )
                  
                  (1,609.6
                  )
                  
                  (308.5
                  )Dividends
                      paid
                  
                  
                  (2,272.0
                  )
                  
                  (602.9
                  )
                  
                  (1,026.9
                  )Advances
                      to employees for purchase of shares, net of repayments
                  
                  
                  53.8
                  
                  
                  103.2
                  
                  
                  130.2Premium
                      of repurchase of shares
                  
                  
                  91.7
                  
                  
                  2.6
                  
                  
                  -Other
                  
                  
                  (40.7
                  )
                  
                  (28.4
                  )
                  
                  4.8Net
                      cash used in financing activities
                  
                  
                  (2,973.9
                  )
                  
                  (3,433.8
                  )
                  
                  (346.7
                  )EFFECTS
                      OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
                  
                  
                  (10.0
                  )
                  
                  (0.8
                  )
                  
                  (101.7
                  )NET
                      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                  
                  
                  (453.6
                  )
                  
                  94.8
                  
                  
                  64.5CASH
                      AND CASH EQUIVALENTS AT BEGINNING OF YEAR
                  
                  
                  1,290.9
                  
                  
                  1,196.1
                  
                  
                  1,131.6CASH
                      AND CASH EQUIVALENTS AT END OF YEAR
                  
                  
                  837.3
                  
                  
                  1,290.9
                  
                  
                  1,196.1SUPPLEMENTAL
                      DISCLOSURES OF CASH FLOW INFORMATIONCash
                      paid during the year for:Interest,
                      net of capitalized interest
                  
                  
                  719.4
                  
                  
                  472.2
                  
                  
                  255.1Taxes
                      on income
                  
                  
                  836.1
                  
                  
                  639.5
                  
                  
                  251.3NONCASH
                      INVESTING AND FINANCING TRANSACTIONSIssuance
                      of shares related to the Labatt transaction
                  
                  
                  -
                  
                  
                  16,683.3
                  
                  
                  -Assets
                      contributed in acquisition of Quinsa
                  
                  
                  -
                  
                  
                  -
                  
                  
                  300.7Downstream
                      merger - InBev Brasil
                  
                  
                  2,883.3
                  
                  
                  -
                  
                  
                  -
  The
            accompanying notes are an integral part of the consolidated financial
            statements.
  F-11
  COMPANHIA
            DE BEBIDAS DAS AMÉRICAS - AMBEV
  NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 AS
            OF
            DECEMBER 31, 2005 AND 2004
 (Amounts
            in millions of Brazilian reais - R$, unless otherwise indicated; Amounts
            in
            Canadian dollars are in millions of Canadian dollars)
 
 1.  OUR
            GROUP
            AND OPERATIONS
  (a)
            Companhia de Bebidas das Américas - AmBev (the “Company”, “AmBev” or “we”) is a
            publicly-held company incorporated under the laws of the Federative Republic
            of
            Brazil, headquartered in São Paulo, Brazil. AmBev and its subsidiaries produce,
            sell and distribute beer, draft beer, malt, soft drinks and other non-alcoholic
            beverages, such as isotonic sport drinks, iced tea and water, in Brazil
            and
            elsewhere in the Americas.
  (b)
            The
            Company is the result of a merger between *Companhia
            Cervejaria Brahma* (“Brahma”) and *Indústrias
            de Bebidas e Conexos Antarctica Paulista S/A* (“Antarctica”), which we refer below as the Brahma-Antarctica transaction.
  Brahma
            was a company engaged in the production and sale of beverages (primarily
            beer
            and soft drinks). Brahma was controlled by Messrs. Jorge Paulo Lemann,
            Marcel
            Herrmann Telles and Carlos Alberto da Veiga Sicupira through certain
            holding
            companies (the “Braco Group”), who collectively held a 55.1% voting stake in
            Brahma prior to the Brahma-Antarctica transaction. The remaining shares
            of
            Brahma were publicly held.
 
 Antarctica
            was also a company engaged in the production and sale of beverages, primarily
            beer and soft drinks. Antarctica was controlled by a foundation named *Fundação
            Antônio e Helena Zerrener* (“FAHZ”), which held an 88.1% voting interest in Antarctica before the
            Brahma-Antarctica transaction took place. The remaining shares of Antarctica
            were publicly held.
 
 The
            Brahma-Antarctica transaction consisted of the combination of Brahma
            and
            Antarctica and was carried out over the course of 1999 and 2000. The
            combination
            led to the formation of AmBev, a holding company that had Brahma and
            Antarctica
            as its subsidiaries, and was performed in three steps.
 
 *First* ,
            in July
            1999 the Braco Group and FAHZ contributed their shares in Brahma and
            Antarctica,
            respectively, to AmBev in exchange for AmBev shares. As a result of such
            contributions, (i) AmBev became the owner of 55.1% of Brahma’s voting shares and
            88.1% of Antarctica’s voting shares, and (ii) the Braco Group and FAHZ each
            owned, respectively, 76% and 24% of AmBev’s voting shares.
 
 *Second,* in
            September 1999, Antarctica’s minority shareholders’ exchanged their shares in
            Antarctica for AmBev shares, causing Antarctica to become a wholly-owned
            subsidiary of AmBev.
 
 *Third* ,
            in
            September 2000, Brahma’s minority shareholders’ exchanged their shares in Brahma
            for AmBev shares, which resulted in Brahma also becoming a wholly-owned
            subsidiary of AmBev.
  F-12
  (c)
            AmBev
            has a franchise agreement with PepsiCo International, Inc. (“PepsiCo”) to
            bottle, sell and distribute Pepsi products in Brazil and in other Latin
            American
            countries, including Lipton Ice Tea and Gatorade, the isotonic sports
            drink.
  (d)
            The
            Company, through its wholly-owned subsidiary Labatt Canada, also maintains
            a
            franchise agreement with Anhenser-Busch, Inc. to produce, bottle, sell
            and
            distribute Budweiser products in Canada. In addition, the Company produces
            and
            distributes Stella Artois under license of InBev in Brazil and Canada
            and, by
            means of a license granted to InBev, it distributes Brahma in the United
            States
            and in certain countries of Europe, Asia and Africa.
  (e)
            AmBev
            shares are traded on the São Paulo Stock Exchange - BOVESPA, and the New York
            Stock Exchange - NYSE, as American Depositary Receipts (ADRs).
  MAIN
            EVENTS THAT OCCURRED IN 2005 AND 2004
  I.
            Merger
            of the parent company InBev Holding Brasil S.A. (“InBev Brasil”)
  The
            Extraordinary Shareholders’ meeting on July 28, 2005 approved the merger of
            InBev Brasil into AmBev.
  The
            referred merger aims at simplifying the corporate structure of which
            InBev
            Brasil, AmBev and its subsidiaries are part and it will result in future
            financial benefits to AmBev and consequently, to its shareholders and
            InBev
            Brasil’s shareholders, as presented below.
  ·
                  The
                      goodwill originally recorded by InBev Brasil is attributed
                      to future
                      profitability of AmBev and is derived from: (i) the acquisition
                      of shares
                      issued by AmBev at the time of the mandatory tender offer held
                      on March
                      29, 2005 totaling R$ 1,351.1; and (ii) the contribution to InBev
                      Brasil of shares previously held by Interbrew International
                      B.V. (“IIBV”),
                      totaling R$ 7,159.0, which will be, following the merger, amortized
                      by AmBev for Brazilian income tax purposes in a period not
                      exceeding ten
                      years, in accordance with the applicable tax legislation in
                      Brazil and
                      with no impact on AmBev’s dividends
                      flow.
  ·
                  InBev
                      Brasil, in compliance with CVM Instruction 349, recorded a
                      provision prior
                      to its merger into AmBev, totaling R$ 5,616.7, corresponding to the
                      difference between the goodwill amount and the tax benefit
                      derived from
                      its amortization, so that AmBev merged only the assets corresponding
                      to
                      the tax benefit resulting from the fact that the goodwill amortization
                      is
                      deductible for tax purposes. The referred provision shall be
                      reverted in
                      the same proportion that the goodwill is amortized by AmBev;
                      thus, not
                      affecting its results of
                      operations.
  ·
                  The
                      goodwill special reserve recorded at AmBev, as a result of
                      such merger,
                      pursuant to provisions in paragraph 1 of Article 6 of CVM Instruction
                      319,
                      at the end of each fiscal year and to the extent that the tax
                      benefit to
                      be obtained by AmBev, as a result of goodwill amortization
                      represent an
                      effective reduction of taxes paid by AmBev, shall be the object
                      of
                      capitalization by AmBev to the benefit of InBev Brasil’s shareholders,
                      without any prejudice to the preemptive right assured to AmBev’s other
                      shareholders in the capital increase subscription resulting
                      from such
                      capitalization, in accordance with the terms of the Article
                      7,*caput*and Paragraphs 1 and 2 of CVM Instruction 319.
  F-13
 
  ·
                    InBev,
                        parent company of InBev Brasil, undertook by itself and by
                        its direct or
                        indirect subsidiaries to capitalize only seventy percent
                        (70%) of the
                        goodwill special reserve value it is entitled to at the end
                        of each fiscal
                        year, verified in accordance with provisions of item III
                        of Article 6 of
                        the CVM Instruction 319, subject to the limits of effective
                        decrease of
                        taxes paid by AmBev mentioned above. The value equivalent
                        to the thirty
                        per cent (30%) non-capitalized balance of reserve, which
                        will benefit
                        AmBev and its shareholders, will be used for distribution
                        to its
                        shareholders as dividends or interest attributed to shareholders’ equity,
                        whenever possible and observing AmBev’s
                        interests.
 ·
                  The
                      balance of contingent liabilities for the Brazilian Social
                      Integration
                      Program (“PIS”) and Contribution for Social Security Financing (“COFINS”)
                      totaling R$ 10.2 related to the legal discussion regarding the
                      calculation basis increase of such contributions existing in
                      the balance
                      sheet of InBev Brasil as at May 31, 2005, as they represent
                      the contingent
                      liabilities on that date, they were recorded upon merger, against
                      the
                      goodwill special reserve previously mentioned. If, during the
                      goodwill
                      amortization period, AmBev is ultimately ordered to pay such
                      contributions, the benefit to be capitalized in favor of InBev
                      Brasil’s
                      current shareholders referred to in item (b) above will be
                      reduced by the
                      amount equivalent to the amount monetarily restated of contributions
                      effectively paid. On the other hand, if the referred contingencies
                      are not
                      purpose of a final ruling, until the last capitalization to
                      be carried out
                      in favor of InBev Brasil’s shareholders, the amount of such contingencies,
                      duly restated will be deducted from the amount to be
                      capitalized.
  ·
                  The
                      merger of InBev by AmBev on July 28, 2005, resulted in an increase
                      of
                      shareholders’ equity of the Company, corresponding to the special goodwill
                      reserve as described in Note 16 (f) as
                      follows:
  Current
                      Assets
                  
                  
                  9.9Goodwill
                      (*)
                  
                  
                  2,893.4Deferred
                  
                  
                  2.4Current
                      Liabilities
                  
                  
                  (12.2
                  )Contingencies
                      Liabilities
                  
                  
                  (10.2
                  )Total
                      Net Assets
                  
                  
                  2,883.3
  (*)  Represented
            by the net amount of future benefit of income tax credit over goodwill
            balance.
  II.
            Merger of the subsidiary Companhia Brasileira de Bebidas (“CBB”)
  The
            Company’s shareholders approved at an Extraordinary Shareholders’ Meeting held
            on May 31, 2005 the merger of the subsidiary CBB into AmBev.
  The
            referred merger aims at simplifying the corporate structure comprised
            by AmBev
            and its subsidiaries, as well as to allow that the amount of R$ 702.7 of
            the goodwill originally recorded at AmBev, derived from purchase of shares
            of
            CBB, attributed to the expectation of future profitability, after the
            merger may
            be fiscally amortized within ten years, in accordance with the applicable
            tax
            legislation.
  F-14
  As
            CBB’s
            financial statements were already consolidated by AmBev, the referred
            merger of
            CBB’s assets and liabilities into AmBev, recorded at book value, did not
            have
            any effects on the consolidated financial statements.
  III.
            InBev - AmBev transactions
  The
            “InBev-AmBev transactions” consisted of two transactions negotiated
            simultaneously: (i) in the first transaction, the Braco Group exchanged
            its
            AmBev shares for shares in Interbrew S.A./N.V. (“Interbrew”); and (ii) in the
            second transaction, AmBev issued shares to Interbrew in exchange for
            Interbrew’s
            100% stake in Labatt Brewing Company Ltd. (“Labatt”).
 
 *Ownership
            of AmBev and Interbrew prior to the InBev-AmBev transactions*
 
 *AmBev*
 
 Immediately
            prior to the InBev-AmBev transactions, AmBev was a public company traded
            on the
            São Paulo Stock Exchange and on the New York Stock Exchange, controlled
            by the
            Braco Group and the FAHZ in accordance with the terms of the AmBev Shareholders’
Agreement. The Braco Group held approximately 53% of AmBev’s common shares while
            FAHZ owned approximately 24% of AmBev’s common shares. The remaining 23% of
            AmBev’s common shares were publicly held.
 
 *Interbrew*
 
 Interbrew
            was also a public company listed on Euronext - Brussels, and was controlled
            by
            Stichting Interbrew (the “Stichting”), which owned approximately 64% of
            Interbrew’s common shares. Two charitable foundations Fund Voorzitter Verhelst
            and the Fund InBev-Baillet Latour (the “InBev Foundations”) owned approximately
            2% of Interbrew’s common shares. The remainder of Interbrew’s common shares were
            held in the market. The Stichting represented the interests of the Interbrew
            Founding Families. Interbrew owned, through certain holding companies,
            100% of
            Labatt.
 
 *Exchange
            of shares between Braco Group and Interbrew Founding Families*
 
 In
            March
            2004, various entities controlled by the Braco Group entered into an
            agreement
            (the “Contribution and Subscription Agreement”) with Interbrew and various
            entities representing the interests of the Interbrew Founding Families
            to
            exchange their controlling interest in AmBev for newly-issued voting
            shares of
            Interbrew, which represented 24.7% of Interbrew’s voting shares.
 
 Upon
            closing of this transaction in August 2004, (i) the Braco Group received
            approximately 44% of the voting interest in the Stichting, which thereupon
            owned
            approximately 56% of Interbrew’s common shares, and (ii) Interbrew received
            approximately a 53% voting interest and a 22% economic interest in AmBev.
            Such
            voting interest was subject to the pre-existing AmBev Shareholders’ Agreement,
            as amended in connection with the InBev-AmBev transactions. In addition,
            Interbrew was renamed InBev S.A./N.V. (“InBev”).
 
 F-15
  *Acquisition
            of Labatt*
 
 Also
            in
            March 2004, AmBev entered into an agreement (the “ *Incorporação* Agreement”) through which an indirect holding company of Labatt would be merged
            into AmBev. As consideration for the acquisition of Labatt, AmBev issued
            AmBev
            common and preferred shares to Interbrew.
 
 With
            the
            consummation of this transaction also in August 2004, (i) Labatt became
            a
            wholly-owned subsidiary of AmBev, and (ii) Interbrew increased its stake
            in
            AmBev to approximately 68% of common shares and 34% of preferred
            shares.
 
 *Ownership
            structure of InBev and AmBev upon consummation of the InBev-AmBev
            transactions*
 
 *InBev*
 
 With
            the
            closing of the InBev-AmBev transactions, 56% of InBev’s voting shares were owned
            by the Stichting, 1% was owned by the InBev Foundations, 17% were owned
            directly
            by entities and individuals associated with the Interbrew Founding Families
            and
            the remaining 26% constituted the public float.
 
 The
            Braco
            Group became the holder of 44% of the Stichting’s voting interests, while the
            Interbrew Founding Families held the remaining 56% of the Stichting’s voting
            interests. In addition, the Braco Group and entities representing the
            interests
            of the Interbrew Founding Families entered into a shareholders’ agreement (the
“InBev Shareholders’ Agreement”) providing for, among other things, joint and
            equal influence over the exercise of the Stichting voting rights in InBev.
 
 *AmBev*
 
 With
            the
            closing of the InBev-AmBev transactions, InBev became the owner of approximately
            68% of AmBev’s voting shares, FAHZ retained approximately 16% of such shares,
            and the remaining 15% were held by the public.
  *Mandatory
            Tender Offer*
  Pursuant
            to Brazilian corporate law, InBev was required to conduct, following
            the
            consummation of the InBev-AmBev transactions, a mandatory tender offer
            (the
“MTO”) for all remaining outstanding common shares of AmBev. The MTO was
            completed in March 2005, and InBev acquired an additional 2,960,070,177
            AmBev
            common shares, increasing its stake in AmBev to approximately an 81%
            voting
            interest and a 56% economic interest.
  FAHZ
            did
            not tender its AmBev shares in the MTO.
  F-16
  *AmBev
            common stock dividend*
 
 The
            subsequent change to AmBev’s ownership structure resulted from the payment by
            AmBev of a common stock dividend in May 2005. Pursuant to the stock dividend
            transaction, AmBev increased its capital by 10,941,151 thousand common
            shares
            and paid a stock dividend to its shareholders of one common share for
            each 5
            shares owned (preferred or common). After the stock dividend was paid,
            InBev’s
            voting interest in AmBev decreased to approximately 73%, FAHZ’s voting stake
            decreased to approximately 13.5% and the voting interest held by AmBev’s public
            shareholders increased to approximately 13.5%.
  *Integration
            of Labatt ́s Operations*
  The
            total
            amount of the transaction consinting of the merger of Labatt Canada’s
            operations, through the wholly-owned subsidiary Labatt Holding ApS (“Labatt
            ApS”), described above, represented R$ 14,441.0, and was recorded as
            follows: (a) AmBev’s capital stock increase, at the amount of R$ 1,600.7;
            and (b) increase of goodwill reserve, recorded as a capital reserve in
            shareholders’ equity, at the amount of R$ 12,840.3.
  As
            Labatt’s operations were consolidated only as from August 27, 2004, the results
            of the years ended December 31, 2005 and 2004 are not comparable. Labatt
            ApS
            consolidated effect in AmBev’s consolidated financial statements on December 31,
            2005 and 2004, is presented below:
  December 312005
                  
                  2004Current
                      Assets
                  
                  
                  1,093.4
                  
                  
                  1,083.0Long-term
                      Assets
                  
                  
                  199.5
                  
                  
                  256.3Permanent
                      Assets
                  
                  
                  16,546.0
                  
                  
                  17,768.4Current
                      Liabilities
                  
                  
                  (992.6
                  )
                  
                  (3,184.8
                  )Long-term
                      Liabilities
                  
                  
                  (2,717.3
                  )
                  
                  (1,499.1
                  )Total
                      Net Assets
                  
                  
                  14,129.0
                  
                  
                  14,423.8
  Year ended December 312005
                  
                  2004
                      (*)Net
                      sales
                  
                  
                  3,975.5
                  
                  
                  1,558.8Cost
                      of sales
                  
                  
                  (1,300.3
                  )
                  
                  (502.4
                  )Gross
                      profit
                  
                  
                  2,675.2
                  
                  
                  1,056.4Operating
                      expenses
                  
                  
                  (2,485.2
                  )
                  
                  (1,040.8
                  )Operating
                      income
                  
                  
                  190.0
                  
                  
                  15.6Non-operating
                      income
                  
                  
                  (160.2
                  )
                  
                  (198.7
                  )Income
                      tax provision
                  
                  
                  (324.8
                  )
                  
                  (93.6
                  )Net
                      loss for the period
                  
                  
                  (295.0
                  )
                  
                  (276.7
                  )
  (*)  Labatt
            ApS’ consolidated results during the period from August 27 through December
            31,
            2004
  F-17
  As
            part
            of the incorporation agreement of Labatt Canada, InBev committed to reimburse
            AmBev any fiscal, tax or contingency disbursement resulting from events
            that
            occurred prior to August 27, 2004. On the date of the transaction with
            InBev,
            Labatt Canada had recognized certain provisions in its financial statements
            totaling CAD 86.0 (equivalent to R$ 193.5). In the fourth quarter of 2004,
            Labatt Canada recorded additional provisions, at the amount equivalent
            to
            R$ 80.3 (CAD 35.7), referring to income tax payable, which, if and when
            paid for, shall be reimbursed to AmBev by InBev. Therefore, on December
            31,
            2005, in the process of elaboration of its consolidated financial statements,
            AmBev, in accordance with its agreement with InBev, recorded assets at
            the
            amount of CAD 121.7, equivalent to R$ 244.8 (R$ 273.9 on December 31,
            2004) recognized under the item **“** other
            current assets - accounts receivable from related parties.
  IV.  Embotelladora
            Dominicana, C. per A. (“Embodom”)
  In
            February 2004, the Company acquired 51% of the capital stock of Embodom,
            located
            in the Dominican Republic, generating goodwill at the amount of R$ 173.4,
            based on the expectation of future results to be amortized within ten
            years,
            starting March 2004. This subsidiary is included in the Company’s consolidated
            financial statements.
  In
            December 2004, the Company recalculated the goodwill due to adjustments
            to the
            shareholders’ equity basis for the acquisition due to interest losses deriving
            from capitalizations made by the Company set forth in the acquisition
            agreement,
            resulting in an adjustment at the amount of R$ 24.0.
  In
            September 2005, goodwill was adjusted by R$ 17.7, due to the recalculation
            of accumulated depreciation of property, plant and equipment of such
            subsidiary
            by depreciation rates adopted by AmBev.
  In
            December 2005, goodwill was written-off by the amount of R$ 13.6 as a
            result of the sale by Embodom of the Red Rock soft drink brand.
  2.  SUMMARY
            OF OUR SIGNIFICANT ACCOUNTING POLICIES
  a)
                  Basis
                      of presentation of our financial
                      statements
  Our
            financial statements are presented in Brazilian reais and have been prepared
            in
            accordance with accounting practices adopted in Brazil, or Brazilian
            GAAP, which
            is based on the Brazilian Corporate Law (Law No. 6,404/76, as amended),
            the
            rules and regulations issued by the “ *Comissão
            de Valores Mobiliários* ”
-
            CVM,
            or the Brazilian Securities Commission, and the accounting standards
            issued by
            the IBRACON - “Instituto dos Auditores Independentes do Brasil”, or the
            Brazilian Institute of Independent Auditors.
  These
            financial statements differ from our Brazilian GAAP financial statements
            due to
            certain reclassifications and changes in terminology, and additional
            explanatory
            notes added to conform more closely to financial reporting practices
            in the
            United States of America. The statement of cash flows conforms to International
            Accounting Standard No. 7, Cash Flow Statements and IBRACON NPC Standard
            No. 20,
            Cash Flow Statements.
 F-18
  Certain
            accounting practices adopted by the Company and its subsidiaries that
            conform to
            Brazilian GAAP may not conform with accounting principles generally accepted
            in
            the United States of America (US GAAP) (Note 23).
   b)
                  Consolidation
                      principles
  The
            consolidated financial statements include the financial statements, prepared
            at
            the same dates, of the subsidiaries either directly or indirectly controlled
            by
            the Company.
  For
            the
            subsidiaries, the totality of assets, liabilities and results have been
            consolidated, and the interest of minority shareholders in the shareholders’
equity and results of operations for the year of the subsidiaries is
            presented
            separately in the consolidated balance sheets and statements of
            income.
  Investments
            in subsidiaries and their shareholders’ equities, as well as inter-company
            assets, liabilities, income and expenses, have been eliminated in consolidation.
            Also, unrealized results arising from the purchase of raw materials and
            products
            from subsidiaries and associated companies, included in the balance of
            inventory
            at the end of each period, as well as other transactions between the
            Company’s
            subsidiaries, are eliminated.
  c)
                  Foreign
                      currency translation
  The
            financial statements of our subsidiaries operating outside Brazil are
            translated
            using the year-end exchange rate. Income and expense accounts are translated
            and
            maintained in Brazilian reais at average exchange rates for the period.
            The
            difference between the net result determined at the exchange rates at
            the
            balance sheet date, and that determined on average exchange rates for
            the
            period, is adjusted under other operating income. In addition, the financial
            statements of the subsidiaries abroad include the foreign exchange gains
            or
            losses on assets and liabilities denominated in foreign currency.
  The
            financial statements for C.A. Cevecera Nacional S.A. (CACN) in Venezuela
            include
            inflation accounting adjustments based on local price index variations
            (measured
            by Consumer Price Index - IPC), which were recorded in Other operating
            income
            (Note 20).
  In
            the
            cases of Maltería Pampa S.A. (Maltería Pampa), Maltería Uruguay S.A. (Maltería
            Uruguay) and Cervecería y Maltería Paysandu S.A. (Cympay), the U.S. dollar is
            considered to be the currency of their economic environment as their
            selling
            prices and cash flows are primarily linked the U.S. dollar. The following
            translation methodology was applied for these companies which adopt the
            U.S.
            dollar as the functional currency: (i) inventories, property, plant and
            equipment, accumulated depreciation and shareholders’ equity accounts were
            translated into U.S. dollars at historical exchange rates and translated
            into
            Brazilian reais at current rates; (ii) monetary assets and liabilities were
            translated at current rates; (iii) depreciation was determined based on the
            U.S. dollar value of the assets, (iv) other income accounts were converted
            at the average exchange rates in the period; and (v) translation gains and
            losses are included in income for the period.
  F-19
  d)
                  Cash
                      and cash equivalents
  Cash
            equivalents consist primarily of time deposits and other short-term investments
            held through private mutual funds denominated in Brazilian reais, having
            a ready
            market and an original maturity of 90 days or less, and which have insignificant
            early withdrawal penalty clauses and are recorded under acquisition cost,
            plus
            interest incurred up to the date of the balance and adjusted, when applicable,
            to its equivalent market value. We also invest in money market instruments
            and
            private mutual funds denominated in U.S. dollars through our off-shore
            subsidiaries.
  e)
                  Short-term
                      investments
  We
            buy
            and sell debt securities with the main objective of mitigating our consolidated
            exposure to currency and interest rate risks. These securities, substantially
            represented by notes and securities, government securities, and bank
            deposit
            certificates, including those denominated in foreign currency, are recorded
            at
            cost, adding, when applicable, the interest income earned “pro rata temporis”;
            if necessary, a provision is recorded for reduction to market values.
            In
            addition, investment fund quotas are measured at market values, and when
            applicable, a provision is recorded to defer the variable unrealized
            income of a
            variable nature.
  The
            balance of short-term investments at December 31, 2005 includes bank
            deposits
            and short-term investments given as guarantee, in connection with the
            issuance
            of foreign debt securities of subsidiaries, in the amount of R$ 16.3
            (R$ 2.4 in 2004).
  f)
                  Trade
                      accounts receivable
  Trade
            accounts receivable are stated at cost. The consolidated allowance for
            doubtful
            accounts receivable is recorded at an amount deemed sufficient by management
            to
            cover probable losses on realization of receivables and totals R$ 169.7 at
            December 31, 2005 (R$ 175.9 in 2004).
  g)
                  Inventories
  Inventories
            are recorded at the average cost of purchases or production, adjusted
            by a
            provision for reduction to realizable values when necessary. On December
            31,
            2005, the consolidated provision for losses, to reduce inventories to
            net
            realizable value amounted to R$ 27.3 (R$ 17.5 in 2004).
  h)
                  Other
                      current assets and long-term
                      receivables
  Other
            current assets and long-term receivables are recorded at cost, including,
            when
            applicable, accrued interest. A provision for reduction to market values
            is
            recorded when necessary.
  F-20
  i)
                  Property,
                      plant and equipment
  Property,
            plant and equipment are stated at cost, indexed for inflation through
            December
            31, 1995, and include the interest incurred in financing during the construction
            phase of certain qualified assets. Property, plant and equipment are
            depreciated
            using the straight-line method, considering the useful lives of the assets,
            at
            the annual rates listed in Note 9.
  Expenditures
            for maintenance and repairs are charged to expense when incurred. Costs
            incurred
            in connection with developing or obtaining internal-use software are
            capitalized
            and depreciated over the useful lives of the software.
  Management
            reviews long-lived assets, primarily buildings and equipment to be held
            and used
            in the business, for the purpose of determining and measuring impairment
            on a
            recurring basis or when events or changes in circumstances indicate that
            the
            carrying value of an asset or group of assets may not be recoverable
            through
            operating activities. Write-down of the carrying value of assets or groups
            of
            assets is made if and when appropriate.
  Returnable
            bottles during the production are recorded as Cost of sales. We maintain
            a small
            number of bottles for sale to distributors to replace bottles broken
            in the
            distribution network. These bottles are recorded in inventory and are
            not used
            during our day-to-day operations. They are not subject to
            depreciation.
  Assets
            held for sale include land and buildings and are reported at the lower
            of their
            carrying amounts or their fair values less cost to sell.
  j)
                  Deferred
                      charges
  The
            Company defers certain charges related primarily to acquisition and
            implementation of software, pre-operation expenses incurred in the construction
            or expansion of a new plant until the plant begins operations and goodwill
            on
            acquisition of subsidiaries subsequently merged. Deferred charges are
            amortized
            on a straight line basis over a period of five years to ten years from
            the
            beginning of operations, when related to pre-operation expenses and from
            the
            following month to the acquisition, when referring to goodwill.
  k)
                  Goodwill
                      and negative goodwill
  Goodwill
            and negative goodwill recorded on the acquisition of a company is computed
            as
            the difference between the purchase consideration and the underlying
            book value
            (usually the tax basis) of the investment acquired. Goodwill is allocated
            between the write-up of tangible assets at market value and estimated
            future
            profitability; each component is amortized over the remaining lives of
            the
            tangible assets or the period of the projected profitability, generally
            ten
            years. Negative goodwill is only amortized upon realization of the related
            asset
            through sale or disposal, unless losses are expected. Generally, goodwill
            is not
            tax deductible until the assets are sold or measures are taken to restructure
            the assets. Goodwill amortization is recorded as other operating expenses
            in our
            statement of operations (Note 20).
  F-21
  l)
                  Pension
                      and other post-retirement benefits
  The
            cash
            contributions paid by the Company to the pension and employee welfare
            foundations (Note 15) prior to December 31, 2001 were determined by independent
            actuaries and treated as operating expenses, although the actuarial obligation
            was not accrued. Since January 1, 2002 the pension obligation is recorded
            on an
            accrual basis.
  Unrealized
            actuarial gains and losses are deferred and recognized in income when
            exceeding
            the higher of (a) 10% of the present value of the actuarial liability and
            (b) 10% of the fair value of the plan’s assets, over the average future
            working life of the plan’s members.
  m)
                  Compensated
                      absences
  The
            liability for future compensation for employee vacations is fully accrued
            as
            earned.
  n)
                  Deferred
                      income taxes
  The
            tax
            effects of net operating loss carryforwards expected to be recovered
            through
            offset against taxable income are recorded as deferred tax assets on
            our balance
            sheet. Pursuant to CVM Deliberation No. 273/98 and CVM Instruction No.
            371/02
            only tax losses which are estimated to be recovered within a ten-year
            period
            based on a discounted cash flow model are recorded as assets. In the
            event
            realization of deferred tax assets is not considered probable, no such
            assets
            are recorded.
  Deferred
            income tax asset as of December 31, 2005 includes the total effect of
            tax losses
            of Brazilian subsidiaries, which have no expiration dates and are available,
            at
            the 30% rate on future taxable income. Part of the tax benefit corresponding
            to
            the tax losses of foreign subsidiaries was not recorded as an asset,
            as
            management cannot determine whether its realization is probable.
  A
            deferred tax liability arises in the case of an excess of net assets
            recorded
            for financial reporting purposes over the tax basis of these net assets.
  Current
            and non-current deferred tax assets and liabilities are presented
            separately.
  o)
                  Stock
                      ownership plan and advances to employees for purchase of
                      shares
  AmBev
            operates a stock ownership plan. The rights to acquire AmBev’s shares granted to
            employees, officers or directors under the stock ownership plans do not
            generate
            a charge to income.
  p)
                  Warrants
                      and stock option premiums
  The
            net
            premium received on the placement of options and warrants is recognized
            in a
            capital reserve in shareholders’ equity.
  F-22
  q)
                  Treasury
                      shares
  We
            acquire our own shares to be held in treasury and record them at cost
            of
            acquisition, as a deduction from shareholders’ equity. Cancellations of treasury
            shares are recorded as a transfer from Treasury shares to Revenue
            reserves.
  r)
                  Interest
                      attributed to shareholders’ equity
  Interest
            attributed to shareholders’ equity is recorded as a deduction from
            unappropriated retained earnings. As required by law, we pay the related
            withholding tax on behalf of our shareholders (Note 16(e)).
  s)
                  Revenues
                      and expenses
  Sales
            revenues and the corresponding cost of sales are recorded upon delivery
            of
            products to the corresponding customers. No reserve for expected returns
            is
            recorded, as such amounts are insignificant. Other expenses and costs
            are
            recognized on accrual basis.
  Selling
            and marketing expenses include costs of advertising and other marketing
            activities. Advertising and marketing expenses are deferred within each
            fiscal
            year and systematically appropriated to results of operations for each
            period,
            in accordance with projected sales volume, thereby reflecting the seasonal
            nature of monthly sales. Advertising expenses (including promotional
            materials)
            were R$ 462.1, R$ 397.8 and R$ 253.2 for the years ended December
            31, 2005, 2004, and 2003, respectively.
  In
            addition to our third-party distribution networks, we operate a direct
            distribution system which distributes our products directly to points
            of sale.
            Direct distribution expenses include product delivery charges and delivery
            personnel cost.
  Expenditures
            relating to ongoing environmental programs are charged to income as incurred.
            Ongoing programs are designed to minimize the environmental impact of
            our
            operations and to manage any potential environmental risks of our activities.
            Provisions with respect to such costs are recorded at the time the obligation
            is
            considered to be probable and reasonably estimable.
  t)
                  Profit
                      sharing and related charges
  The
            year-end provision of our profit-sharing program is an estimate made
            by our
            management. Amounts paid with respect to the program may differ from
            the
            liability accrued.
 
 u)
                  Earnings
                      per share
  Earnings
            per share were calculated based on the number of shares outstanding at
            the end
            of each year, net of treasury shares.
  F-23
  v)
                  Financial
                      instruments and derivatives
  Forwards
            and cross-currency interest rate swaps:
  The
            Company enters into derivative financial instruments to mitigate its
            consolidated exposure to currency and interest rate risks. Accordingly,
            as
            determined by the CVM rules, financial instruments “not designated as hedges for
            accounting purposes” are measured at the lower of cost based on the contractual
            conditions between the Company and counterparties (“yield curve”) or market
            value and accounted for as "Unrealized gain on derivatives" or "Unrealized
            loss
            on derivatives". Financial Instruments are recorded at amortized
            cost.
  The
            notional amount of cross-currency interest rate swap and forward operations
            are
            not recorded in the balance sheet.
  Forward
            and swap instruments in commodities:
  The
            Company enters into derivative financial instruments to mitigate its
            consolidated exposure to the costs of raw material to be purchased, denominated
            in foreign currency and subject to prices fluctuation of
            commodities.
  The
            net
            results of such derivative instruments, designated as hedges for accounting
            purposes, are measured at cost plus accrued interest, equivalent to their
            market
            value, deferred and recorded in the Company's balance sheet under "Other
            Assets
            and Liabilities", and recognized in the earnings under “Cost of sales” when the
            product is sold.
  w)
                  Tax
                      incentives
  Certain
            states in Brazil provide indirect tax incentives in the form of deferrable
            tax
            payments and partial or complete tax rebates in order to promote investments
            in
            their regions (Note 13). The recognition of these benefits occurs only
            when the
            gain is definite and all conditions have been met and is recognized against
            Other operating income (Note 20). The benefits granted are not subject
            to claw
            back provisions in the event we do not meet the program target; however,
            future
            benefits may be withdrawn. Amounts recognized during 2005 totaled R$ 151.8
            (R$ 193.3 in 2004 and R$ 176.0 in 2003).
  x)
                  Accrued
                      liabilities for legal proceedings
  Provisions
            for contingencies are recorded and updated to current values for labor,
            tax,
            civil and commercial claims being disputed at the administrative and
            judicial
            levels, based on estimates of losses determined by the Company’s external legal
            counsels, for lawsuits in which a loss is considered probable.
  Tax
            savings obtained based on provisional court decisions resulting from
            claims
            filed by the Company against the tax authorities, if recognized in the
            statement
            of income, are accrued for until the saving is assured through a final
            ruling in
            favor of the Company.
  F-24
  y)
                  Other
                      current and long-term liabilities
  These
            are
            recorded based on known or estimated value, increased, when applicable,
            by the
            corresponding charges and monetary variations incurred through the year-end
            date
            of the financial statements.
  z)
                  Related
                      party transactions
  Transactions
            with related parties include, among other operations, the purchase and
            sale of
            raw materials such as malt, concentrates, labels, corks and several finished
            products, eliminated in the Company’s consolidated financial statements, except
            for the non-consolidated portion of operations with jointly-controlled
            entities
            (recorded based on the proportional consolidation method) and other related
            parties.
  aa)
                  Use
                      of accounting estimates
  The
            preparation of consolidated financial statements in conformity with Brazilian
            GAAP requires management to make estimates that affect the reported amounts
            of
            certain assets, liabilities and other transactions. Thus, various estimates
            are
            included in the financial statements referring to the useful lives of
            property,
            plant and equipment, the provisions necessary to reduce assets to the
            realization amount and for contingent liabilities and the determination
            of
            provision for income tax, which are based on the best estimates of the
            Company’s
            management; however, actual results could differ from those estimates.
            Estimates
            are used for, but not limited to: accounting for allowance for doubtful
            accounts, asset impairments, depreciable lives of assets, useful lives
            of
            intangible assets, recognition of deferred taxes and contingencies. The
            Company’s management periodically reviews these estimates and believes that
            significant differences do not exist.
  ab)
                  Proportionally
                      consolidated financial statements
  The
            assets and liabilities, income and expenses of entities which are
            jointly-controlled through a shareholders’ agreement have been proportionally
            consolidated based on the Company’s total ownership in the capital stock of the
            respective jointly-controlled subsidiary. Amounts corresponding to the
            proportional assets, liabilities, income and expenses, arising from
            inter-company transactions, were eliminated in the proportional
            consolidation.
  Quinsa
            has been purchasing its own shares, thus, changing the percentage of
            the
            Company’s economic interest in Quinsa, which on December 31, 2005 reached 59,2%.
            These acquisitions resulted in a loss amounting to R$ 65.6 in the Company’s
            earnings for the year ended on December 31, 2005 (R$ 80.8 in 2004,
            R$ 11.0 in 2003), as the amount paid was higher than the book value of the
            shares.
  On
            September 2005 Quinsa acquired from its parent company Beverage Associates
            Corp.
            (“BAC”) 5.32% equity interest in Quilmes Industrial (Bermudas) Ltd. (“QIB”), a
            subsidiary of Quinsa, as announced on August 4, 2005.
  F-25
  As
            determined in the referred announcement, the value paid of US$ 110 million
            will be subject to adjustments based on the EBITDA (earnings before interest,
            taxes, and depreciation and amortization) of QIB for the year ended on
            December
            31, 2005 and a net debt of QIB on this same date. The final purchase
            price shall
            be determined until March 31, 2006.
  Quinsa’s
            controlling shareholders are entitled to exchange their 373.5 million
            class A
            shares of Quinsa with common and preferred shares of AmBev, in April
            of each
            year, or at any moment when a change occurs in the control structure
            of AmBev.
            AmBev also has the right to determine the exchange of class A shares
            of Quinsa
            for AmBev’s shares starting from the end of the 7th year (beginning from April
            2003). In both cases, the number of AmBev’s shares to be issued to BAC will be
            determined by a pre-agreed formula based on the EBITDA of the two
            companies.
  On
            August
            4, 2005, BAC and AmBev agreed to implement the following changes referring
            to
            the amount to be paid by AmBev to BAC, when Quinsa’s Class A shares held by BAC
            are exchanged for AmBev’s shares: (i) BAC’s equity interest in Quinsa will
            be calculated considering that all Quinsa’s shares held by other parts rather
            than AmBev or BAC have been repurchased by Quinsa prior to the exercise
            of the
            call and put options (ii) Quinsa’s net debt used in the formula to
            calculate the call and put options amount shall be then adjusted in order
            to
            reflect this hypothetical repurchase; and (iii) AmBev will pay BAC an
            additional amount in cash equivalent to the QIB’s EBITDA for 2005 multiplied by
            0.0638544.
  The
            net
            assets of Quinsa, Agrega Inteligência em Compras Ltda. (“Agrega”) and Ice Tea do
            Brasil Ltda. (“ITB”), proportionally consolidated in the Company’s financial
            statements, are as follows:
  December
                      31, 2005Quinsa (i)
                  
                  Agrega (ii)
                  
                  ITB (iii)
                  
                  TotalCurrent
                      assets
                  
                  
                  523.8
                  
                  
                  1.4
                  
                  
                  0.4
                  
                  
                  525.6Long-term
                      receivables
                  
                  
                  115.1
                  
                  
                  -
                  
                  
                  5.1
                  
                  
                  120.2Permanent
                      assets
                  
                  
                  1,180.0
                  
                  
                  0.4
                  
                  
                  0.8
                  
                  
                  1,181.2Current
                      liabilities
                  
                  
                  (531.6
                  )
                  
                  (1.8
                  )
                  
                  -
                  
                  
                  (533.4
                  )Long-term
                      liabilities
                  
                  
                  (477.8
                  )
                  
                  -
                  
                  
                  (11.1
                  )
                  
                  (488.9
                  )Minority
                      interest
                  
                  
                  (103.8
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (103.8
                  )Total
                      net assets (liabilities)
                  
                  
                  705.7
                  
                  
                  -
                  
                  
                  (4.8
                  )
                  
                  700.9
  (i)  59,2%
            ownership interest.
  (ii)  50%
            ownership interest.
  (iii)  50%
            ownership interest.
  F-26
 
 December
                      31, 2004Quinsa (i)
                  
                  Agrega (ii)
                  
                  ITB (iii)
                  
                  TotalCurrent
                      assets
                  
                  
                  418.8
                  
                  
                  1.0
                  
                  
                  0.3
                  
                  
                  420.1Long-term
                      receivables
                  
                  
                  242.6
                  
                  
                  -
                  
                  
                  6.3
                  
                  
                  248.9Permanent
                      assets
                  
                  
                  1,138.0
                  
                  
                  0.5
                  
                  
                  0.9
                  
                  
                  1,139.4Current
                      liabilities
                  
                  
                  (436.3
                  )
                  
                  (1.1
                  )
                  
                  -
                  
                  
                  (437.4
                  )Long-term
                      liabilities
                  
                  
                  (440.8
                  )
                  
                  -
                  
                  
                  (11.6
                  )
                  
                  (452.4
                  )Minority
                      interest
                  
                  
                  (201.6
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (201.6
                  )Total
                      net assets (liabilities)
                  
                  
                  720.7
                  
                  
                  0.4
                  
                  
                  (4.1
                  )
                  
                  717.0
  (i)  54,8%
            ownership interest.
  (ii)  50%
            ownership interest.
  (iii)  50%
            ownership interest.
  Quinsa’s,
            Agrega’s and ITB’s results, proportionally consolidated in the Company’s
            financial statements, are as follows:
  Year
                      ended December 31, 2005Quinsa
                  
                  Agrega
                  
                  ITB
                  
                  TotalNet
                      sales
                  
                  
                  1,299.9
                  
                  
                  1.2
                  
                  
                  -
                  
                  
                  1,301.1Cost
                      of products and services sold
                  
                  
                  (536.7
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (536.7
                  )Gross
                      profit
                  
                  
                  763.2
                  
                  
                  1.2
                  
                  
                  -
                  
                  
                  764.4Operating
                      expenses
                  
                  
                  (457.7
                  )
                  
                  (3.1
                  )
                  
                  (1.0
                  )
                  
                  (461.8
                  )Operating
                      income (loss)
                  
                  
                  305.5
                  
                  
                  (1.9
                  )
                  
                  (1.0
                  )
                  
                  302.6Non-operating
                      income
                  
                  
                  (9.0
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (9.0
                  )Provision
                      for income tax
                  
                  
                  (113.8
                  )
                  
                  -
                  
                  
                  0.4
                  
                  
                  (113.4
                  )Statutory
                      interest
                  
                  
                  (20.1
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (20.1
                  )Minority
                      interest
                  
                  
                  (39.0
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (39.0
                  )Net
                      income (loss) for the year
                  
                  
                  123.6
                  
                  
                  (1.9
                  )
                  
                  (0.6
                  )
                  
                  121.1
 
 Year
                      ended December 31, 2004Quinsa
                  
                  Agrega
                  
                  ITB
                  
                  TotalNet
                      sales
                  
                  
                  1,153.0
                  
                  
                  0.8
                  
                  
                  -
                  
                  
                  1,153.8Cost
                      of products and services sold
                  
                  
                  (510.3
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (510.3
                  )Gross
                      profit
                  
                  
                  642.7
                  
                  
                  0.8
                  
                  
                  -
                  
                  
                  643.5Operating
                      expenses
                  
                  
                  (432.8
                  )
                  
                  (2.8
                  )
                  
                  (0.9
                  )
                  
                  (436.5
                  )Operating
                      income (loss)
                  
                  
                  209.9
                  
                  
                  (2.0
                  )
                  
                  (0.9
                  )
                  
                  207.0Non-operating
                      income
                  
                  
                  2.4
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2.4Provision
                      for income tax
                  
                  
                  (77.0
                  )
                  
                  -
                  
                  
                  0.3
                  
                  
                  (76.7
                  )Statutory
                      interest
                  
                  
                  (19.7
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (19.7
                  )Minority
                      interest
                  
                  
                  (29.2
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (29.2
                  )Net
                      income (loss) for the year
                  
                  
                  86.4
                  
                  
                  (2.0
                  )
                  
                  (0.6
                  )
                  
                  83.8
  F-27
  The
            table
            below presents Quinsa’s main holdings in subsidiaries, fully consolidated in its
            financial statements, and proportionally adjusted in the AmBev’s consolidated
            financial statements:
  Quinsa’s total
                    holdings
                      at
                    December 31
                      - %2005
                  
                  2004Cerveceria
                      y Malteria Quilmes S.A.I.C.A. y G.
                  
                  
                  92.67
                  
                  
                  87.36Cerveceria
                      Boliviana Nacional La Paz
                  
                  
                  79.25
                  
                  
                  74.61Cerveceria
                      Chile S.A.
                  
                  
                  92.95
                  
                  
                  87.63Cerveceria
                      Paraguay S.A.
                  
                  
                  81.19
                  
                  
                  76.54Fábrica
                      Paraguaya de Vitrios S.A.
                  
                  
                  92.68
                  
                  
                  87.38Fábricas
                      Nacionales de Cerveza S.A.
                  
                  
                  90.58
                  
                  
                  85.09Quilmes
                      Industrial (Bermuda) Ltd. - QIB
                  
                  
                  92.95
                  
                  
                  87.63
  ac)  Reclassifications
  In
            order
            to improve the presentation of certain amounts and transactions, as well
            as to
            maintain the comparison between periods in the consolidated financial
            statements, the Company recorded the reclassification of: (i) the result of
“net gains on derivative instruments” and “net losses on derivative
            instruments”, presented in note 15 (d); (ii) “unrealized losses on
            derivative operations” and “exchange variation and unrealized gains on financial
            assets”, presented in the cash flow statements; (iii) the zero-rated excise
            tax (“IPI”) credits classified in long-term assets, under the item “other
            recoverable taxes and charges” for the long-term liabilities, under the item
“ICMS and IPI Contingencies”; and (iv) the amount of certain projects
            classified as other investments for deferred charges.
   3.  TRADE
            ACCOUNTS RECEIVABLE, NET
  Trade
            accounts receivable relate primarily to sales to Beer and soft drinks
            customers.
            Credit risk is minimized by the large customer base and control procedures
            through which we monitor the creditworthiness of customers. Changes in
            the
            allowance for doubtful accounts were as follows:
  2005
                  
                  2004
                  
                  2003At
                      beginning of year
                  
                  
                  175.9
                  
                  
                  182.3
                  
                  
                  139.5Provision
                  
                  
                  84.9
                  
                  
                  1.4
                  
                  
                  11.1Write-offs,
                      net of recoveries
                  
                  
                  (75.8
                  )
                  
                  (45.9
                  )
                  
                  (10.2
                  )Acquisition
                      of Labatt
                  
                  
                  2.7
                  
                  
                  -
                  
                  
                  -Quinsa
                      (proportionally consolidated)
                  
                  
                  (18.0
                  )
                  
                  38.0
                  
                  
                  41.9At
                      end of year
                  
                  
                  169.7
                  
                  
                  175.9
                  
                  
                  182.3
  F-28
  4.
                  INVENTORIES
  2005
                  
                  2004Finished
                      products
                  
                  
                  322.2
                  
                  
                  396.8Work
                      in process
                  
                  
                  67.8
                  
                  
                  62.8Raw
                      materials
                  
                  
                  515.1
                  
                  
                  606.7Production
                      materials
                  
                  
                  186.6
                  
                  
                  199.3Supplies
                      and others
                  
                  
                  113.7
                  
                  
                  132.8Provision
                      for losses
                  
                  
                  (27.3
                  )
                  
                  (17.5
                  )1,178.1
                  
                  
                  1,380.9
  5.
                  TRANSACTIONS
                      WITH RELATED PARTIES
  The
            main
            transactions of the Company with related parties are listed in the following
            table:
  2005Balances
                  
                  TransactionsCompanies
                  
                  Accounts
                    receivable
                  
                  Accounts
                    payable
                  
                  Inter-company
                    loans
                  
                  Net
                    sales
                  
                  Net
                    financial
                    resultsAmBev
                  
                  
                  804.3
                  
                  
                  (1,748.0
                  )
                  
                  (1.559.2
                  )
                  
                  366.7
                  
                  
                  (324.2
                  )CBB
                      (iv)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  113.8
                  
                  
                  108.4Fratelli
                      (iii)
                  
                  
                  -
                  
                  
                  (11.2
                  )
                  
                  133.3
                  
                  
                  6.7
                  
                  
                  (6.1
                  )IBA-Sudeste
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  44.4
                  
                  
                  399.1Jalua
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (40.8
                  )
                  
                  -
                  
                  
                  (51.3
                  )Monthiers
                  
                  
                  3.4
                  
                  
                  -
                  
                  
                  1,421.9
                  
                  
                  -
                  
                  
                  (68.6
                  )Arosuco
                  
                  
                  4.5
                  
                  
                  -
                  
                  
                  384.5
                  
                  
                  511.6
                  
                  
                  -Dunvegan
                  
                  
                  216.6
                  
                  
                  -
                  
                  
                  (417.5
                  )
                  
                  -
                  
                  
                  36.3Cympay
                  
                  
                  0.4
                  
                  
                  -
                  
                  
                  16.8
                  
                  
                  98.2
                  
                  
                  0.4Malteria
                      Pampa
                  
                  
                  8.3
                  
                  
                  -
                  
                  
                  -
                  
                  
                  145.4
                  
                  
                  -CRBS
                  
                  
                  122.6
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Eagle
                  
                  
                  -
                  
                  
                  (868.1
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Aspen
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (153.1
                  )
                  
                  -
                  
                  
                  5.7Labatt
                      Canada (i) (ii)
                  
                  
                  283.4
                  
                  
                  -
                  
                  
                  14.6
                  
                  
                  214.8
                  
                  
                  -Other
                      - Brazil
                  
                  
                  63.4
                  
                  
                  (9.2
                  )
                  
                  233.3
                  
                  
                  (1.3
                  )
                  
                  2.9Other
                      - Abroad
                  
                  
                  4.0
                  
                  
                  (106.1
                  )
                  
                  (35.2
                  )
                  
                  (175.5
                  )
                  
                  (2.9
                  )
  F-29
 
 2004Balances
                  
                  TransactionsCompanies
                  
                  Accounts
                    receivable
                  
                  Accounts
                    payable
                  
                  Inter-company
                    loans
                  
                  Net
                    sales
                  
                  Net
                    financial
                    resultsAmBev
                  
                  
                  -
                  
                  
                  (2.0
                  )
                  
                  (3,334.0
                  )
                  
                  -
                  
                  
                  (219.7
                  )CBB
                  
                  
                  24.4
                  
                  
                  -
                  
                  
                  1,789.7
                  
                  
                  234.7
                  
                  
                  168.2Fratelli
                  
                  
                  -
                  
                  
                  (4.3
                  )
                  
                  (51.8
                  )
                  
                  -
                  
                  
                  -IBA-Sudeste
                  
                  
                  3.2
                  
                  
                  -
                  
                  
                  1,125.5
                  
                  
                  29.8
                  
                  
                  -Jalua
                  
                  
                  -
                  
                  
                  -
                  
                  
                  11.9
                  
                  
                  -
                  
                  
                  (55.6
                  )Monthiers
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,242.2
                  
                  
                  -
                  
                  
                  68.9Arosuco
                  
                  
                  5.2
                  
                  
                  -
                  
                  
                  336.3
                  
                  
                  416.6
                  
                  
                  -Dunvegan
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (873.0
                  )
                  
                  -
                  
                  
                  45.3Cympay
                  
                  
                  -
                  
                  
                  (12.4
                  )
                  
                  -
                  
                  
                  116.2
                  
                  
                  (0.3
                  )Malteria
                      Pampa
                  
                  
                  6.0
                  
                  
                  -
                  
                  
                  -
                  
                  
                  152.3
                  
                  
                  -Aspen
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (197.0
                  )
                  
                  -
                  
                  
                  (1.7
                  )Labatt
                      Canada (i) (ii)
                  
                  
                  323.8
                  
                  
                  (14.1
                  )
                  
                  -
                  
                  
                  85.7
                  
                  
                  -Other
                      - Brazil
                  
                  
                  74.3
                  
                  
                  (74.6
                  )
                  
                  (38.2
                  )
                  
                  64.7
                  
                  
                  (9.1
                  )Other
                      - Abroad
                  
                  
                  5.4
                  
                  
                  (24.4
                  )
                  
                  (7.7
                  )
                  
                  152.0
                  
                  
                  1.2
  (i)
                  Transaction
                      with other companies associated with InBev which are not eliminated
                      in the
                      Company’s consolidated financial
                      statements.
  (ii)
                  Additionally,
                      there are service agreements between Labatt Canada and InBev
                      in which
                      services rendered or expenses incurred on behalf of the other
                      party are
                      reimbursed. On December 31, 2005, Labatt Canada had accounts
                      receivable of
                      approximately R$ 6.6 (R$ 6.6 in December 31, 2004) and accounts
                      payable of approximately R$ 3.5 (R$ 1.7 in December 31, 2004)
                      with InBev as part of the referred
                      agreements.
  (iii)
                  At
                      November 30, 2005, IBA-Sudeste was merged into
                      Fratelli.
  (iv)
                  As
                      mentioned in note 1(b)(ii), CBB was merged into AmBev on May,
                      31,
                      2005.
  Names
            used:
  ·
                    Indústria
                        de Bebidas Antarctica do Sudeste S.A.
                        (“IBA-Sudeste”)
 ·
                    Jalua
                        Spain S.L. (“Jalua”)
 ·
                    Monthiers
                        S.A. (“Monthiers”)
 ·
                    Arosuco
                        Aromas e Sucos Ltda. (“Arosuco”)
 ·
                    Dunvegan
                        S.A. (“Dunvegan”)
 ·
                    Cervecería
                        y Maltería Paysandú - Cympay
                        (“Cympay”)
 ·
                    Maltería
                        Pampa S.A. (“Maltería Pampa”)
 ·
                    Aspen
                        Equities Corporation (“Aspen”)
 ·
                  Fratelli
                      Vita Bebidas S.A. (“ Fratelli”)
   F-30
  Transactions
            with related parties are carried out under usual market conditions and
            include,
            among other operations, the purchase and sale of raw materials such as
            malt,
            concentrates, labels, corks and several finished products, eliminated
            in the
            Company’s consolidated financial statements, except for the non-consolidated
            portion of operations with jointly-controlled entities (recorded based
            on the
            proportional consolidation method) and related parties.
  Loan
            agreements between the Company’s subsidiaries in Brazil have undetermined
            duration and some are assessed market financial charges. The agreements
            that
            involve the Company’s subsidiaries headquartered abroad are usually monetarily
            indexed based on the US dollar exchange rate plus interest of up to 10%
            p.a..
            Inter-company loans are consolidated based on the same criteria described
            above.
   6.
                  OTHER
                      ASSETS
  2005
                  
                  2004Current
                      assets:Deferred
                      income from commodities, swap and forward operations, net
                  
                  
                  75.6
                  
                  
                  54.9Refund
                      of marketing expenses
                  
                  
                  45.6
                  
                  
                  24.1Prepaid
                      expenses
                  
                  
                  296.0
                  
                  
                  242.1Advances
                      to suppliers and others
                  
                  
                  23.1
                  
                  
                  42.8Accounts
                      receivables from related parties
                  
                  
                  265.4
                  
                  
                  297.8Other
                      accounts receivable
                  
                  
                  73.9
                  
                  
                  91.1779.6
                  
                  
                  752.8Non-current
                      assets:Other
                      taxes and charges recoverable (*)
                  
                  
                  130.8
                  
                  
                  134.2Prepaid
                      expenses
                  
                  
                  126.5
                  
                  
                  111.7Investments
                      in debt securities
                  
                  
                  69.4
                  
                  
                  147.4Prepaid
                      pension benefit cost
                  
                  
                  20.0
                  
                  
                  20.6Other
                      receivables with related parties
                  
                  
                  4.8
                  
                  
                  -Other
                      accounts receivable
                  
                  
                  24.6
                  
                  
                  39.7376.1
                  
                  
                  453.6
   (*)
                  The
                      Company has recorded zero-rate exercise (IPI) credits totaling
                      R$ 228.1 (R$ 228.1 on December 31, 2004), for which it recorded
                      a full valuation allowance for the total credit
                      amounts.
  On
            December 31, 2005 the balance of this provision, previously recorded
            in
            liabilities, was reclassified to “Other taxes and charges recoverable” with aims
            to better reflecting the Company’s financial position.
  F-31
  7.
                  INVESTMENTS
                      - SIGNIFICANT DIRECT AND INDIRECT SUBSIDIARIES
  Percentage
                    interest
                    (total shares)
                  
                  Shareholders’
                    equity
                    (capital deficiency)
                  
                  Net
                      income (loss)Fully
                      consolidated
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2003Arosuco
                  
                  
                  99.7
                  
                  
                  99.7
                  
                  
                  373.2
                  
                  
                  334.2
                  
                  
                  273.2
                  
                  
                  219.8
                  
                  
                  176.3CACN
                  
                  
                  50.2
                  
                  
                  50.2
                  
                  
                  (22.2
                  )
                  
                  (27.1
                  )
                  
                  (35.0
                  )
                  
                  (47.2
                  )
                  
                  (39.4
                  )CBB
                  
                  
                  -
                  
                  
                  99.9
                  
                  
                  -
                  
                  
                  5,067.9
                  
                  
                  -
                  
                  
                  948.3
                  
                  
                  2,046.7Cerveceria
                      Suramericana (Cervesursa)
                  
                  
                  80.0
                  
                  
                  80.0
                  
                  
                  55.7
                  
                  
                  102.2
                  
                  
                  (38.5
                  )
                  
                  (31.4
                  )
                  
                  (7.3
                  )Compañia
                      Cervecera AmBev Peru A.C. (AmBev Peru)
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  (32.3
                  )
                  
                  (0.7
                  )
                  
                  (54.8
                  )
                  
                  (9.2
                  )
                  
                  (5.7
                  )Eagle
                      Distribuidora de Bebidas S.A (Eagle)
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  2,376.1
                  
                  
                  2,660.4
                  
                  
                  (284.4
                  )
                  
                  (24.0
                  )
                  
                  (539.0
                  )Hohneck
                  
                  
                  50.7
                  
                  
                  100.0
                  
                  
                  1,165.4
                  
                  
                  1,245.6
                  
                  
                  (80.2
                  )
                  
                  (69.6
                  )
                  
                  (67.1
                  )IBA
                      Sudeste
                  
                  
                  -
                  
                  
                  99.3
                  
                  
                  -
                  
                  
                  1,365.8
                  
                  
                  -
                  
                  
                  (78.9
                  )
                  
                  47.5Fratelli
                  
                  
                  77.8
                  
                  
                  -
                  
                  
                  401.7
                  
                  
                  -
                  
                  
                  18.7
                  
                  
                  -
                  
                  
                  -Industria
                      del Atlántico (Atlántico)
                  
                  
                  50.0
                  
                  
                  50.0
                  
                  
                  45.1
                  
                  
                  62.0
                  
                  
                  (10.6
                  )
                  
                  17.2
                  
                  
                  5.8Jalua
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  3,282.2
                  
                  
                  3,593.0
                  
                  
                  (310.8
                  )
                  
                  (16.9
                  )
                  
                  (451.2
                  )Labatt
                      Holding ApS
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  14,132.0
                  
                  
                  14,423.8
                  
                  
                  (292.0
                  )
                  
                  276.7
                  
                  
                  -Labatt
                      Canada
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  
                  
                  
                  (1,848.2
                  )
                  
                  
                  
                  
                  54.0
                  
                  
                  -Maltería
                      Pampa
                  
                  
                  60.0
                  
                  
                  100.0
                  
                  
                  196.9
                  
                  
                  197.4
                  
                  
                  23.3
                  
                  
                  22.4
                  
                  
                  41.5Monthiers
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  3,318.9
                  
                  
                  3,576.1
                  
                  
                  257.1
                  
                  
                  42.3
                  
                  
                  (451.1
                  )Proportionally
                      consolidated companies (*)Agrega
                  
                  
                  50.0
                  
                  
                  50.0
                  
                  
                  0.1
                  
                  
                  0.4
                  
                  
                  (3.9
                  )
                  
                  (2.0
                  )
                  
                  (1.9
                  )ITB
                  
                  
                  50.0
                  
                  
                  50.0
                  
                  
                  (4.7
                  )
                  
                  (4.1
                  )
                  
                  0.6
                  
                  
                  (0.6
                  )
                  
                  (0.7
                  )Quinsa
                  
                  
                  56.2
                  
                  
                  54.8
                  
                  
                  705.7
                  
                  
                  720.6
                  
                  
                  123.5
                  
                  
                  (86.4
                  )
                  
                  149.7
  (*)
                  The
                      pro-rated balances proportionally consolidated and included
                      in the
                      consolidated balance sheet at December 31, 2005 were: total
                      assets -
                      R$ 1,827.2 (R$ 1,808.4 in 2004); working capital - R$ 22.9
                      (R$ 17.3 in 2004) and cash and cash equivalents of R$ 226.1
                      (R$ 175.4 in 2004). The pro-rated net income from these affiliates
                      included in the consolidated statement of operations totaled
                      R$ 551.9
                      (R$ 83.8 in 2004 and R$ 147.1 in
                      2003).
  F-32
  8.
                  GOODWILL
                      AND NEGATIVE GOODWILL
  2005
                  
                  2004Goodwill:CBB
                      - attributed to:Property,
                      plant and equipment fair value excess (i)
                  
                  
                  -
                  
                  
                  144.6Expected
                      future profitability (i)
                  
                  
                  -
                  
                  
                  702.7-
                  
                  
                  847.3Expected
                      future profitability:Labatt
                      Canada (v)
                  
                  
                  16,383.3
                  
                  
                  16,677.7Quinsa
                  
                  
                  1,123.2
                  
                  
                  1,123.2Cympay
                  
                  
                  26.6
                  
                  
                  26.6Embodom
                  
                  
                  224.1
                  
                  
                  214.9Malteria
                      Pampa
                  
                  
                  28.1
                  
                  
                  28.1Indústrias
                      Del Atlântico
                  
                  
                  5.1
                  
                  
                  5.1Cervejaria
                      Miranda Corrêa S.A.
                  
                  
                  5.5
                  
                  
                  5.5Labatt
                      Canada Subsidiaries (ii)
                  
                  
                  3,323.9
                  
                  
                  3,648.6Quinsa
                      and subsidiaries (proportionally consolidated) (iv)
                  
                  
                  622.2
                  
                  
                  547.6Total
                      goodwill
                  
                  
                  21,742.0
                  
                  
                  23,124.6Accumulated
                      amortization
                  
                  
                  (4,997.2
                  )
                  
                  (4,779.1
                  )Total
                      goodwill, net
                  
                  
                  16,744.8
                  
                  
                  18,345.5Negative
                      goodwill:CBB
                      (iii)
                  
                  
                  -
                  
                  
                  (149.9
                  )Cervesursa
                  
                  
                  (14.4
                  )
                  
                  (16.4
                  )Total
                      goodwill, net
                  
                  
                  (8.2
                  )
                  
                  (8.8
                  )Total
                      negative goodwill
                  
                  
                  (22.6
                  )
                  
                  (175.1
                  )Goodwill,
                      net
                  
                  
                  16,722.2
                  
                  
                  18,170.4
  (i)
                  In
                      May 2005, the Company merged the net assets of its subsidiary
                      CBB by book
                      value as mentioned in note 1 (b)
                      (ii).
  (ii)
                  The
                      balance of the accumulated amortization referring to goodwill
                      existing in
                      Labatt Canada amounted to R$ 3,289.7 on December 31, 2005
                      (R$ 3,418.2 on December 31,
                      2004).
  (iii)
                  The
                      negative goodwill on investment in the subsidiary CBB was reclassified
                      to
                      “deferred income”, as a result of net assets merger of this subsidiary, as
                      mentioned in note 1(b)(ii).
  (iv)
                  As
                      mentioned in note 2 (n), Quinsa acquired for the amount of
                      US$ 110.0
                      million (equivalent to R$ 244.4) the equity interest of 5.32% that
                      BAC held in QIB, resulting in a goodwill totaling US$ 74.9 million
                      (equivalent to R$ 166.4). The effect on the Company’s consolidated
                      totaling of R$ 97.3.
  (v)
                  The
                      accumulated amortization balance referring to Labatt APS’ goodwill in
                      Labatt Canada amounts to R$ 1,034.8 on December 31, 2005
                      (R$ 409.7 on December 31,
                      2004).
  F-33
  Changes
            in the goodwill and negative goodwill, net are as follows:
  2005
                  
                  2004At
                      beginning of year, net
                  
                  
                  18,170.4
                  
                  
                  1,687.3Goodwill
                      on new acquisitions
                  
                  
                  5.1
                  
                  
                  16,892.6Reclassification
                      to deferred charge and PP&E
                  
                  
                  (198.8
                  )
                  
                  -Labatt
                      and subsidiaries
                  
                  
                  (12.0
                  )
                  
                  355.1Quinsa
                      and subsidiaries (proportionally consolidated)
                  
                  
                  96.3
                  
                  
                  37.3Amortization
                  
                  
                  (1,342.9
                  )
                  
                  (803.6
                  )Negative
                      goodwill realized
                  
                  
                  -
                  
                  
                  1.7Goodwill
                      realized - Note 1 (iv)
                  
                  
                  (13.6
                  )
                  
                  -Adjustment
                      of goodwill - Note 1 (iv)
                  
                  
                  17.7
                  
                  
                  -At
                      the end of year, net
                  
                  
                  16,722.2
                  
                  
                  18,170.4
  9.
                    PROPERTY,
                          PLANT AND EQUIPMENT
 2005
                  
                  2004
                  
                  Annual
                    depreciation
                    rates - %Land
                  
                  
                  309.9
                  
                  
                  328.6Buildings
                      and constructions
                  
                  
                  2,602.6
                  
                  
                  2,578.2
                  
                  
                  4Machinery
                      and equipment
                  
                  
                  8,242.5
                  
                  
                  7,968.2
                  
                  
                  10
                      (i)Offsite
                      equipment
                  
                  
                  1,723.2
                  
                  
                  1,551.0
                  
                  
                  10
                      (i)Other
                      assets and intangibles
                  
                  
                  1,262.2
                  
                  
                  1,241.9
                  
                  
                  4
                      to 20 (ii)Construction
                      in progress
                  
                  
                  442.1
                  
                  
                  368.314,582.5
                  
                  
                  14,036.2Accumulated
                      depreciation
                  
                  
                  (9,177.9
                  )
                  
                  (8,504.5
                  )5,404.6
                  
                  
                  5,531.7
  (i)  Rates
            may
            vary due to the number of production shifts in which the asset is
            used.
  (ii)  Concentration
            of assets with annual depreciation rate of 20% as of December 31,
            2005.
  The
            subsidiaries held for sale properties, on December 31, 2005, with a total
            book
            value of R$ 104.5 (R$ 113.8 in 2004), which are classified under
            long-term receivables, net of a provision for expected losses on realization,
            in
            the amount of R$ 66.3 (R$ 69.1 in 2004).
  In
            view
            of bank loans and leases taken by the Company and its subsidiaries, at
            December
            31, 2005, there are pledged property, machinery and equipment, at the
            residual
            amount of R$ 538.9 (R$ 781.4 in 2004). Such restriction has no impact
            on the use of such assets and on the Company’s operations.
  F-34
 
 10.
                  DEFERRED
                      CHARGES
  2005
                  
                  2004Pre-operating
                      costs
                  
                  
                  243.1
                  
                  
                  208.6Implementation
                      and expansion expenses
                  
                  
                  53.5
                  
                  
                  53.9Future
                      profitability (i)
                  
                  
                  9,322.0
                  
                  
                  109.1Provision
                      for realization of goodwill (ii)
                  
                  
                  (5,650.4
                  )Other
                  
                  
                  202.0
                  
                  
                  162.64,170.2
                  
                  
                  534.2Accumulated
                      amortization
                  
                  
                  (936.9
                  )
                  
                  (240.1
                  )3,233.3
                  
                  
                  294.1
  (i)  This
            refers substantially to the goodwill originally recorded by InBev Brasil,
            which
            was transferred to AmBev, as a result of the merger process occurred
            on July 28,
            2005. The goodwill reclassified to deferred charges is based on future
            profitability of AmBev.
  (ii)  As
            mentioned in note 1 (b)(i)(b), such provision corresponds to the difference
            between goodwill amount and tax benefit derived from its
            amortization.
   11.
                  LOANS
                      AND FINANCING
  Annual
                  
                  
                  
                  Current
                  
                  Long-termFinal maturity
                  
                  financial charges
                  
                  Currency
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004Brazilian*reais*:ICMS
                      sales tax incentives
                  
                  
                  September
                      2015
                  
                  
                  4,77%
                  
                  
                  R$
                  
                  
                  89.5
                  
                  
                  93.5
                  
                  
                  237.3
                  
                  
                  288.2Acquisition
                      of equipment
                  
                  
                  December
                      2010
                  
                  
                  TJLP
                      +3% a 4,5%
                  
                  
                  R$
                  
                  
                  104.2
                  
                  
                  135.2
                  
                  
                  362.3
                  
                  
                  209.5Working
                      Capital
                  
                  
                  January
                      2006
                  
                  
                  104%
                      do CDI%
                  
                  
                  R$
                  
                  
                  1.4
                  
                  
                  274.5
                  
                  
                  -
                  
                  
                  -195.1
                  
                  
                  503.2
                  
                  
                  599.6
                  
                  
                  497.7Foreign
                      currency:Working
                      Capital
                  
                  
                  October
                      2010
                  
                  
                  2,5%
                      a 5,50%
                  
                  
                  USD
                  
                  
                  673.7
                  
                  
                  462.4
                  
                  
                  103.0
                  
                  
                  367.1Working
                      Capital
                  
                  
                  October
                      2010
                  
                  
                  BA
                      + 0,45%
                  
                  
                  CAD
                  
                  
                  4.8
                  
                  
                  1,911.7
                  
                  
                  1,408.2
                  
                  
                  737.7Working
                      Capital
                  
                  
                  January
                      2006
                  
                  
                  4,48%
                  
                  
                  ARS
                  
                  
                  27.9
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Working
                      Capital
                  
                  
                  September
                      2008
                  
                  
                  12,0%
                  
                  
                  VEB
                  
                  
                  30.8
                  
                  
                  136.1
                  
                  
                  117.4
                  
                  
                  -Working
                      Capital
                  
                  
                  April
                      2012
                  
                  
                  18,0%
                  
                  
                  DOP
                  
                  
                  51.0
                  
                  
                  26.8
                  
                  
                  32.4
                  
                  
                  16.1Working
                      Capital
                  
                  
                  October
                      2010
                  
                  
                  7,75%
                  
                  
                  GTQ
                  
                  
                  27.5
                  
                  
                  35.7
                  
                  
                  37.8
                  
                  
                  -Working
                      Capital
                  
                  
                  October
                      2010
                  
                  
                  6,75%
                  
                  
                  PEN
                  
                  
                  28.8
                  
                  
                  -
                  
                  
                  158.6
                  
                  
                  -Bond
                      2011
                  
                  
                  December
                      2011
                  
                  
                  10,50%
                  
                  
                  USD
                  
                  
                  6.0
                  
                  
                  6.8
                  
                  
                  1,170.3
                  
                  
                  1,327.2Bond
                      2013
                  
                  
                  September
                      2013
                  
                  
                  8,75%
                  
                  
                  USD
                  
                  
                  35.1
                  
                  
                  39.8
                  
                  
                  1,170.3
                  
                  
                  1,327.2Import
                      financing
                  
                  
                  January
                      2007
                  
                  
                  4,85%
                      a 6,5%
                  
                  
                  USD
                  
                  
                  4.6
                  
                  
                  262.8
                  
                  
                  58.1
                  
                  
                  -Acquisition
                      of equipment
                  
                  
                  September
                      2011
                  
                  
                  7,5%
                      a 8,45%
                  
                  
                  USD
                  
                  
                  70.5
                  
                  
                  -
                  
                  
                  341.3
                  
                  
                  -Acquisition
                      of equipment
                  
                  
                  January
                      2009
                  
                  
                  3,0%
                      a 4,5%
                  
                  
                  UMBNDES
                  
                  
                  16.0
                  
                  
                  16.8
                  
                  
                  63.5
                  
                  
                  40.1Notes
                      - Série A
                  
                  
                  July
                      2008
                  
                  
                  6,56%
                  
                  
                  USD
                  
                  
                  -
                  
                  
                  -
                  
                  
                  379.2
                  
                  
                  -Notes
                      - Série B
                  
                  
                  July
                      2008
                  
                  
                  6,07%
                  
                  
                  CAD
                  
                  
                  -
                  
                  
                  -
                  
                  
                  100.6
                  
                  
                  -Sênior
                      Notes - BRI
                  
                  
                  June
                      2011
                  
                  
                  7,50%
                  
                  
                  CAD
                  
                  
                  -
                  
                  
                  -
                  
                  
                  178.6
                  
                  
                  -Other
                  
                  
                  September
                      2007
                  
                  
                  8,36%
                  
                  
                  USD
                  
                  
                  37.6
                  
                  
                  41.0
                  
                  
                  75.3
                  
                  
                  54.51,014.3
                  
                  
                  2,939.9
                  
                  
                  5,394.6
                  
                  
                  3,869.91,209.4
                  
                  
                  3,443.1
                  
                  
                  5,994.2
                  
                  
                  4,367.6
  Abbreviations
            used:
  ·  USD
            -
            United States Dollar
  ·  CAD
            -
            Canadian Dollar
  ·  ARS
            -
            Argentine Peso
  F-35
 
 ·VEB
            - Venezuelan
            Bolivar
  ·  DOP
            -
            Dominican Peso
  ·  GTQ
            -
            Guatemalan Quetzal
  ·  PEN
            -
            Peruvian Sol
  ·  TJLP
            -
            Long-Term Interest Rate - corresponding to 9.75% p.a. on 12.31.05
  ·  ICMS
            -
            Value-Added Tax on Sales and Services
  ·  CDI
            -
            Interbank Deposit Certificate - corresponding to 17.99% p.a. on
            12.31.05
  ·  BA
            -
            Bankers Acceptance - corresponding to 3.106% on 12.31.05
  ·  UMBNDES
            -
            Rate incurring on BNDES financing pegged to Currency Basket
  a)Principal
            loan contracts and programs
  (i)  ICMS
            sales tax incentives
  The
            loans
            relate to programs offered by certain states in Brazil through which
            a
            percentage of the monthly ICMS due is financed by Government related
            agencies,
            generally over a five year period (Note 12).
  The
            amount of R$ 372.1 (R$ 330.2 as of December 31, 2004) of “Sales tax
            Deferrals” includes a current portion of R$ 19.5 (R$ 54.5 in 2004)
            classified under “Other taxes and contributions payable”.
  The
            remaining amounts refer to the financed deferrals of ICMS due for periods
            of up
            to twelve years, as part of industrial incentive programs. The deferred
            percentages may be fixed during the program or vary regressively, from
            75% in
            the first year to 40% in the final year. The deferred amounts are partially
            indexed at 60% to 80% of a general price index.
  (ii)  Notes
            issued in the international market
  The
            Company issued in September 2003 US$ 500 million in foreign securities
            (“Bond 2013”). These Notes incur 8.75% interest p.a., and will be amortized
            semi-annually from March 2004, with final maturity in September 2013.
            On August
            10, 2004, the Company registered Bond 2013 with the SEC (Securities and
            Exchange
            Commission) under the U.S. Securities Act of 1933 and its subsequent
            amendments.
            In addition, Bond 2013 was registered at the Luxembourg Stock Exchange
            for
            settlement through the Depository Trust Company (“DTC”), Euroclear and
            Clearstream.
  The
            Company issued in December 2001 US$ 500 million in foreign securities
            (“Bond 2011”). These Notes incur 10.5% interest p.a., amortized semi-annually
            from June 2002, with final maturity in December 2011. The Company registered
            Bond 2011 with the SEC on October 4, 2002.
  F-36
 
 b)  Mortgages
            and collateral
  Loans
            and
            financings for expansion, construction of new plants and purchases of
            equipment
            are guaranteed by mortgages on the plant properties and financial liens
            on
            equipment. AmBev’s subsidiaries, except for North America operations, hold debt
            and loans for the purchase of raw materials guaranteed by collaterals
            of AmBev,
            which at December 31, 2005 totaled R$ 323.5 (R$ 295.7 in
            2004).
  c)  Breach
            of
            covenant
  As
            of
            December 31, 2005, the Company and its subsidiaries are in compliance
            with debt
            and liquidity ratio covenants in connection with obtaining the
            loans.
  d)  Maturities
  At
            December 31, 2005, the Company’s long-term loans, by year of maturity, are the
            following:
  2007
                  
                  
                  529.52008
                  
                  
                  1,012.42009
                  
                  
                  118.02010
                  
                  
                  1,684.52011
                      and on
                  
                  
                  2,649.85,994.2
 e)  Labatt
            Canada
  (i)  Working
            capital
  On
            December 12, 2002 and
            on
            May 25, 2004, Labatt Canada entered into two loan agreements at the respective
            amounts of CAD 600 million and CAD 700 million, with a
            bank consortium and final maturity date on December 12, 2005. Both
            agreements were fully paid on October 12, 2005.
  On
            October 12, 2005, Labatt Canada entered into a forward loan agreement
            at the
            amount of CAD 1.2 billion with a syndicated banck, of which CAD 900 million
            a
            term loan and CAD 300 million in a revolving facility with maturity dated
            on
            October 12, 2010, and
            interest at the bankers acceptance rate, plus applicable margin, the
            ceiling of
            which is 0.75 %
            per annum .
            On
            December 31, 2005, the bankers’ acceptance average rate on the debt was 3.106 %
            p.a.
            and the applicable margin was 0.35 %
            per
            annum.
  (ii)  Senior
            notes
  On
            July
            23, 1998, Labatt Canada entered into a loan agreement of US$ 162
            million ,
            represented by
            Series A Bank Notes (“Notes - Series A”) and CAD 50 million in Series B
            Bank Notes (“ Notes
            -
            Series B ”),
            contracted from a group of institutional investors. The Notes are subject
            to the
            following interest
            rates: (a)  6.56%
            p.a., over the portion in US dollars; and (b) 6.07% p.a. over the Canadian
            dollars. The Notes mature on July 23,
            2008.
  F-37
 
 On
            June
            15, 2001, Brewers Retail Inc (“BRI”), a company proportionally consolidated by
            Labatt Canada, entered into a CAD 200 million loan agreement through
            Senior
            Notes (“Senior Notes - BRI”), with a group of institutional investors. Senior
            Notes are subject to fixed interest rates of 7.5% p.a. and the maturity
            date is
            June 15, 2011.
  12.
                  SALES
                      TAX DEFERRALS AND ICMS TAX INCENTIVE
                      PROGRAMS
  We
            currently participate in programs whereby a percentage of payments of
            ICMS, due
            from sales generated by specific production facilities, are deferrable
            (financed
            by a state related financial agent) for periods of generally five years
            from
            their original due date.
  Sales
            tax
            deferrals arise from programs under which percentages deferrable usually
            range
            from 40% to 75% over the life of the program. Amounts deferrable under
            these
            programs are unlimited, except in certain states with which we have specific
            agreements. Balances deferred generally accrue interest and are only
            partially
            inflation-indexed.
  Description
                  
                  2005
                  
                  2004Short-term
                      liabilities:Loans
                      and financings (Note 11)
                  
                  
                  89.5
                  
                  
                  93.5Sales
                      tax deferrals (included in Other taxes payable)
                  
                  
                  19.5
                  
                  
                  54.5109.0
                  
                  
                  148.0Long-term
                      liabilities:Loans
                      and financings (Note 11)
                  
                  
                  237.3
                  
                  
                  288.2Sales
                      tax deferrals
                  
                  
                  352.6
                  
                  
                  275.7589.9
                  
                  
                  563.9
  13.
                  COMMITMENTS
                      AND CONTINGENCIES
  a)  Tax
            and
            legal claims
  We
            are
            contesting the payment of certain taxes and contributions and have made
            judicial
            escrow deposits (Judicial deposits) of equivalent or lesser amounts pending
            final judicial decisions. Our management believes that the accrued liability
            for
            contingencies, including interest, is sufficient to meet probable and
            reasonably
            estimable losses in the event of unfavorable rulings.
  The
            following probable losses have been identified based on the advice of
            outside
            legal counsel and have been provided as liabilities in our financial
            statements:
  F-38
 
 Description
                  
                  2004
                  
                  Provisions
                  
                  Payments
                  
                  Reversals
                  
                  Reclassifications
                  
                  Monetaryrestatement
                  
                  2005Indirect
                      taxes:ICMS
                      and IPI (i)
                  
                  
                  312.4
                  
                  
                  505
                  
                  
                  (4.3
                  )
                  
                  (139.2
                  )
                  
                  -
                  
                  
                  2.2
                  
                  
                  221.6PIS
                      and COFINS (ii)
                  
                  
                  383.5
                  
                  
                  6.6
                  
                  
                  (3.4
                  )
                  
                  (41.0
                  )
                  
                  10.2
                  
                  
                  38.6
                  
                  
                  394,5Labor
                      claims (iii)
                  
                  
                  309.0
                  
                  
                  218.6
                  
                  
                  (55.7
                  )
                  
                  (109.9
                  )
                  
                  (*)
                      (88.7
                  )
                  
                  5.0
                  
                  
                  278.3Income
                      tax and social contribution (iv)
                  
                  
                  71.3
                  
                  
                  7.9
                  
                  
                  -
                  
                  
                  (5.8
                  )
                  
                  -
                  
                  
                  (0.4
                  )
                  
                  73.0Claims
                      from distributors and resellers (v)
                  
                  
                  47.2
                  
                  
                  39.8
                  
                  
                  (9.1
                  )
                  
                  (34.0
                  )
                  
                  -
                  
                  
                  (0.1
                  )
                  
                  43.8Others
                      (vi)
                  
                  
                  119.5
                  
                  
                  37.0
                  
                  
                  (14.7
                  )
                  
                  (19.7
                  )
                  
                  (6.2
                  )
                  
                  1.1
                  
                  
                  117.0Total
                      accrued provision for contingencies
                  
                  
                  1,242,9
                  
                  
                  360.4
                  
                  
                  (87.2
                  )
                  
                  (349.6
                  )
                  
                  (84.7
                  )
                  
                  46.4
                  
                  
                  1,128.2
  (*)
            Reclassification from contingencies to accounts payable referring to
            lawsuits
            settled through legal agreements
  Abbreviations
            used:
  ·  IRPJ
            -
            Corporate Income Tax; and
  ·  CSLL
            -
            Social Contribution on Net Income
  AmBev
            may
            be exposed to additional possible risks, based on the opinion of legal
            counsel,
            estimated at R$ 4,557.0 (R$ 1,241.1 in 2004) which have not been
            accruded for. Although there can be no assurance that AmBev will prevail
            in
            every case, management does not believe that the ultimate disposition
            of these
            legal contingencies will have a material effect on AmBev’s financial position or
            results of operations.
  During
            the year ended on December 31, 2005, possible contingencies increased
            by
            approximately R$ 3,316.0, mainly due to new tax deficiency notices received
            by the Company and its subsidiaries related to tax authorities’ understanding
            about the Brazilian laws dealing with taxation in Brazil of profits obtained
            by
            subsidiaries or affiliated companies incorporated abroad.
  Based
            on
            its external consultants’ opinions, the Company understands that such tax
            deficiency notices were made based on incorrect analysis of the laws
            mentioned
            above, because, among other factors: (i) it considers the assumption of
            availability, which did not exist in prevailing laws in the period related
            to
            the deficiency notice; (ii) it disregards the existence of a treaty entered
            into between Brazil and Spain to avoid double taxation; and (iii) errors in
            the determination of amounts supposedly due.
  The
            Company, based on the opinion of its external consultants did not recorded
            any
            provisions in relation to the tax deficiency notices received in the
            period, as
            well as those previous ones related to the same matter, amounting to
            R$ 3,600.5 as the Company understands these are not justified.
            Nevertheless, as the related laws had not been subjected to examination
            at the
            highest level by the Judiciary Branch, the Company, based on the opinion
            of its
            legal consultants considered the probability of loss as possible in the
            amount
            of R$ 2,451.3 and as remote, in the amount of R$ 1,149.2.
  F-39
 
 Main
            liabilities related to fiscal claims and provisions for
            contingencies:
  (i)  ICMS
            and
            IPI
  This
            legal proceeding relates mainly to tax disputes to extemporaneous ICMS
            credits
            on purchases of property, plant and equipment prior to 1996.
  The
            Company has zero-rated IPI credits, totaling R$ 228.1 as of December 31,
            2005 (R$ 228.1 on December 31, 2004), which was reclassified to the account
            "Other assets - other recoverable taxes and charges" of long-term assets,
            as
            mentioned in note 2 (o).
  (ii)  PIS
            and
            COFINS
  PIS
            - We
            obtained an injunction in the first quarter of 1999, which was confirmed
            by a
            lower court judgment, granting the right to pay PIS (up to December 31,
            2002
            only) on billings, without paying such contribution on other revenues.
            Following
            the enactment of Law No. 10,637 of December 31, 2002, which established new
            rules for calculating PIS with effects from December 1, 2002, the Company
            and
            its subsidiaries began to pay such contribution on other revenues, as
            prescribed
            by current legislation.
  COFINS
            -
            The 3 rd Region
            Local Federal Court confirmed a legal decision in favor of the Company
            and its
            subsidiaries, which allows them to pay COFINS on billings, releasing
            them from
            paying such contribution on other income. Following the enactment of
            Law No.
            10,833/03 as of December 29, 2003, effective February 1, 2004 the Company
            and
            its subsidiaries began to pay such contribution, as prescribed by current
            legislation.
  At
            December 31, 2005, the provision primarily refers to amounts that were
            not paid
            pursuant to the injunctions, and which will be subject to provisioning
            until
            they are assured by a final decision in favor of the Company.
  (iii)  Labor
            claims
  We
            are
            involved in approximately 12,100 legal proceedings with former and current
            employees, mainly relating to dismissals, severance, health and safety
            premiums,
            supplementary retirement benefits and other matters. We have established
            provisions in connection with all proceedings for which we believe, based
            on the
            advice of our outside legal counsel, there is a probable chance of loss.
            Judicial escrow deposits, principally for labor claims, totaled R$ 151.2 at
            December 31, 2005 (R$ 129.6 in 2004). At December 31, 2005 none of these
            claims had probable estimated losses which individually exceeded
            R$ 2.0.
  (iv)  Income
            tax and social contribution
  This
            provision relates substantially to the recognition of the deductibility
            of
            interest attributed to shareholders’ equity in the calculation of social
            contribution for the year 1996.
  F-40
 
 (v)  Claims
            from distributors and resellers
  We
            have
            several claims filed against us by former distributors whose contracts
            were
            terminated due to their failure to meet our guidelines and a general
            restructuring of our distribution network. We have provisions for probable
            losses of R$ 43.6, based on advice of outside legal counsel (R$ 47.2
            in 2004).
  (vi)  Other
            provisions
  These
            provisions relate substantially to issues involving the National Social
            Security
            Institute (INSS), products and suppliers.
  (vii)  Labatt
            Canada
  Certain
            beer and alcoholic beverage producers of the United States, Canada and
            Europe
            were mentioned in collective suits for losses and damages brought under
            the
            claim of marketing of alcoholic beverages for under age consumers. Labatt
            Canada
            was mentioned in one of these proceedings. Such suit will be vigorously
            defended
            and, at this time, it is not possible to estimate the loss probability
            or
            estimate its amount.
  Labatt
            was sued by the Canadian Government concerning the interest rate used
            in certain
            contracts with related parties existing in the past. The total amount
            claimed by
            the Government is approximately CAD 200.0, equivalent to R$ 402.4 on
            December 31, 2005.
  Should
            Labatt be requested to pay this amount, AmBev will be fully reimbursed
            by
            InBev.
  During
            the fourth quarter of 2005, Labatt paid approximately CAD 24, reducing
            the
            provision recorded in 2004 to CAD 62 (equivalent to R$ 124.5 on December
            31, 2005) as “Provision for contingency for Income Tax”, and AmBev recorded
            account receivable for the amount of R$ 173.0 (equivalent to CAD 86) as an
            adjustment in the consolidation of Labatt.
  b)  Commitments
  We
            do not
            have commitments for construction under contract at December 31, 2005
            (at
            December 31, 2004 are estimated at R$ 100.0).
  We
            have
            contracts with certain key suppliers to buy volumes of key materials
            in our
            production processes, including aluminum, plastics and natural gas, but
            without
            fixed volumes or amounts.
  c)  Environmental
            issues
  We
            are
            subject to federal, state and local environmental laws. These laws generally
            provide for control of air emissions and require responsible parties
            to
            undertake remediation of hazardous waste disposal sites. Civil penalties
            may be
            imposed for noncompliance.
  F-41
 
 We
            provide for remediation costs and penalties when a loss is probable and
            the
            amount is reasonably determinable. It is not presently possible to estimate
            the
            amount of all remediation costs that might be incurred or penalties that
            may be
            imposed. Our management does not presently anticipate that such costs
            and
            penalties, to the extent not previously provided for, will have a material
            adverse effect on our consolidated financial position, results of operations
            or
            cash flows.
  At
            present we believe there are no unasserted environmental claims or assessments.
            We have made substantial capital expenditures to bring existing facilities
            into
            compliance with various environmental laws.
  Recent
            environmental expenditures are as follows:
  UnauditedYear
                      ended December 31
                  
                  Property, plant
                    and
                      equipment
                  
                  Waste
                    treatment
                  
                  Total2005
                  
                  
                  17.2
                  
                  
                  47.1
                  
                  
                  64.32004
                  
                  
                  12.9
                  
                  
                  36.1
                  
                  
                  49.02003
                  
                  
                  9.3
                  
                  
                  38.3
                  
                  
                  47.6
  Budgeted
            environmental expenditures for the five-year period ending December 31,
            2010
            total approximately R$ 245.7 (unaudited).
  14.
                  OTHER
                      LIABILITIES
  2005
                  
                  2004Current
                      liabilities:Dividends
                      payable
                  
                  
                  5.5
                  
                  
                  -Deposits
                      for returnable package (i)
                  
                  
                  79.1
                  
                  
                  84.4Provision
                      for restructuring (ii)
                  
                  
                  106.5
                  
                  
                  183.0Provision
                      for income tax contingency (Note 13 a (vii))
                  
                  
                  124.5
                  
                  
                  189.9Deferred
                      income from commodities swap and forward instruments
                  
                  
                  41.2
                  
                  
                  12.7Marketing
                      accounts payable
                  
                  
                  151.7
                  
                  
                  101.1Provision
                      for royalties payment
                  
                  
                  33.9
                  
                  
                  37.1Accounts
                      payable for repurchase of treasury shares
                  
                  
                  74.2
                  
                  
                  -Other
                      accounts payable
                  
                  
                  282.2
                  
                  
                  251.4898.8
                  
                  
                  859.6Long-term
                      liabilities:Post-retirement
                      benefits (Note 15b)
                  
                  
                  584.6
                  
                  
                  646.0Deferred
                      income tax and social contribution (Note 18 (b))
                  
                  
                  94.6
                  
                  
                  138.5Deferred
                      income from debt swap instruments
                  
                  
                  95.8
                  
                  
                  90.3Other
                      accounts payable
                  
                  
                  50.7
                  
                  
                  61.5825.7
                  
                  
                  936.3
  (i)
                    These
                        deposits are made by points of sale in Canada and at the
                        time of the beer
                        sale, as a guarantee on the returnable packaging, and they
                        are given back
                        when the bottles are
                        returned.
  F-42
  (ii)
                  On
                      September 8, 2004, Labatt Canada announced the closing of its
                      plant in New
                      Westminster, British Columbia. In order to cover the lay-off
                      expenses,based
                      on an agreement entered into with labor union, Labatt registered
                      provisions in the amount ofCAD
                      22.2 in 2004 (equivalent to R$ 49.1 on December 31, 2004). The
                      closing of such plant occurred in November 2005, and the provision
                      decreased to CAD 3.6 million (equivalent to R$ 7.3 on December 31,
                      2005).
  Additionally,
            in December 2004, Labatt Canada announced a workforce restructuring aimed
            at
            reducing the personnel fixed cost by 20%. Thus, Labatt recorded a provision
            of
            CAD 60.7 (equivalent to 122.1
            on
            December 31, 2005 and R$ 134.0
            on December 31, 2004) in order to cover lay-off expenses. On December
            31, 2005
            the provision was reduced to CAD 41.1 (equivalent to R$ 82.7 on December
            31, 2005).
  On
            March
            31, 2005, Labatt Canada announced the closing of Metro Brewery plant,
            in
            Toronto, Ontario. The closing shall occur in 2006. This provision totaling
            CAD
            8.2 on December 31, 2005 (equivalent to R$ 16.5 in December 31, 2005).
  15.
                  EMPLOYEE
                      BENEFITS
  a)  AmBev
            pension benefits
  AmBev
            sponsors a defined-benefit pension plan (closed to new participants since
            May
            1998) and a defined-contribution plan, which supplement benefits that
            the
            Brazilian government’s social security system provides to our employees and
            those of our Brazilian subsidiaries. Contributions by AmBev under the
            plan are
            determined based on a percentage of participant salaries.
  These
            plans are administered by the AmBev Pension Fund, Instituto AmBev de
            Previdência
            Privada (IAPP). In the year ended December 31, 2005, the Company contributed
            R$ 4.8 (R$ 3.9 in 2004) to IAPP. The IAPP was established solely for
            the benefit of our employees, and its assets are held independently.
            We nominate
            the three directors of IAPP. At December 31, 2005 we had 4,938 participants
            in
            our plan (4,539 in 2004), of which 2,519 (2,611 in 2004) participated
            in the
            defined-benefit plan.
  Based
            on
            the independent actuarial reports, the funded status of AmBev’s plans at
            December 31 is determined as follows:
  2005
                  
                  2004Fair
                      value of plan assets
                  
                  
                  725.5
                  
                  
                  633.3Present
                      value of actuarial liability
                  
                  
                  (485.2
                  )
                  
                  (438.1
                  )Funded
                      status
                  
                  
                  240.3
                  
                  
                  195.2
  The
            surplus of assets of IAPP is recognized by the Company in its consolidated
            financial statements under “Surplus assets - Instituto AmBev”, in the amount of
            R$ 20.0 (R$ 20.6 in 2004), estimated as the maximum limit of its
            future use, also taking into account the legal restrictions that prevent
            the
            return of a possible remaining actuarial surplus, not used in the payment
            of
            private security benefits, in the event of a winding up of IAPP.
  F-43
  b)  Post-retirement
            benefits and others
  The
            Company directly provides medical assistance, reimbursement of medicine
            expenses
            and other benefits to certain retired pensioners.
  Labatt
            Canada, the Company’s indirect subsidiary, provides pension plan benefits in the
            defined contribution model and in the defined benefit model to its employees,
            as
            well as certain post-retirement benefits; Labatt Canada also provides
            certain
            post-retirement pension benefits to certain distributors. On December
            31, 2005
            liabilities deriving from these obligations are recorded in the Company’s
            financial statements in the account “Provision for employee benefits” in the
            following amounts:
  Labatt (i)
                  
                  Labatt (ii)
                  
                  AmBev (ii)
                  
                  TotalProjected
                      Benefit Obligation
                  
                  
                  2,307.6
                  
                  
                  310.4
                  
                  
                  113.4
                  
                  
                  2,731.4Fair
                      value of plan assets
                  
                  
                  (1,630.4
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (1,630.4
                  )Plan
                      deficit
                  
                  
                  677.2
                  
                  
                  310.4
                  
                  
                  113.4
                  
                  
                  1,101.0Non-amortized
                      actuarial adjustments
                  
                  
                  (459.8
                  )
                  
                  (123.3
                  )
                  
                  (29.0
                  )
                  
                  (612.1
                  )Distributors’
                      plans (iii)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  95.7Total
                      liabilities
                  
                  
                  217.4
                  
                  
                  187.1
                  
                  
                  84.4
                  
                  
                  584.6
  (i)
                  Pension
                      plan.
 (ii)
                    Post-retirement
                        benefit plan.
 (iii)
                      The
                          obligation referring to the distributors’ plan accounts for Labatt
                          Canada’s pro rata participation under the obligations of these
                          plans which
                          will be financed by Labatt Canada by means of the allocation
                          of services
                          costs of these affiliated
                          companies.
 Change
            in
            the provision for employee benefits, according to the independent actuary’s
            report:
  AmBev
                  
                  Labatt
                  
                  TotalBalance
                      on December 31, 2004
                  
                  
                  78.4
                  
                  
                  567.6
                  
                  
                  646.0Financial
                      charges
                  
                  
                  13.8
                  
                  
                  149.1
                  
                  
                  162.9Foreign
                      exchange variation
                  
                  
                  -
                  
                  
                  (50.5
                  )
                  
                  (50.5
                  )Transfer
                      of provision to restructuring
                  
                  
                  -
                  
                  
                  14.1
                  
                  
                  14.1Benefits
                      paid
                  
                  
                  (7.8
                  )
                  
                  (180.1
                  )
                  
                  (187.9
                  )Balance
                      on December 31, 2005
                  
                  
                  84.4
                  
                  
                  500.2
                  
                  
                  584.6
  c)  Welfare
            foundation - the FAHZ
  The
            employees and retirees of the Company in Brazil receive health care and
            dental
            assistance from the FAHZ, one of our shareholders.
  F-44
  The
            changes in the provision for these benefits of FAHZ, based on independent
            actuarial reports, were as follows:
  2005
                  
                  2004January
                      1, 2004
                  
                  
                  177.0
                  
                  
                  163.5Interest
                      charges
                  
                  
                  40.5
                  
                  
                  30.6Actuarial
                      adjustment
                  
                  
                  -
                  
                  
                  3.3Benefits
                      paid
                  
                  
                  (23.9
                  )
                  
                  (20.4
                  )December
                      31, 2004
                  
                  
                  193.6
                  
                  
                  177.0
  The
            actuarial liabilities related to the benefits provided by the FAHZ on
            December
            2005 were fully offset by an equivalent amount of assets held by the
            FAHZ on the
            same date. The surplus assets were not recorded by us in our financial
            statements, since under current welfare foundation regulations, any surplus
            of
            assets over liabilities cannot be returned to the Company.
  In
            accordance with NPC No. 26, the Company recognized the actuarial liability
            related to the obligation for the benefits provided directly by AmBev,
            but not
            for benefits provided by the FAHZ. The assumption is that this obligation
            will
            not be legally imputed to the Company and will be covered by the contributions
            made annually to the FAHZ (up to 10% of the net income of each year),
            which are
            recognized through the statement of operations.
  d)  Actuarial
            assumptions
  The
            medium and long-term assumptions adopted by the independent actuary,
            in the
            calculation of the actuarial liability were the following:
  Annual percentage - in nominal termsAmBev
                  
                  Labatt2005
                  
                  2004
                  
                  2005
                  
                  2004Discount
                      rate
                  
                  
                  10.8
                  
                  
                  10.9
                  
                  
                  5.0
                  
                  
                  5.7Expected
                      long-term rate of return on assets
                  
                  
                  14.9
                  
                  
                  15.4
                  
                  
                  8.0
                  
                  
                  8.0Increase
                      in the remuneration factor
                  
                  
                  7.2
                  
                  
                  7.3
                  
                  
                  3.0
                  
                  
                  3.0Increase
                      in health care costs
                  
                  
                  7.2
                  
                  
                  7.3
                  
                  
                  -
                  
                  
                  4.0
  16.
                  SHAREHOLDERS’
                      EQUITY
  a)  Capital
            and shareholders’ rights
  (i)  Capital
  The
            Company’s capital stock on December 31, 2005 amounted to R$ 5,691.4
            (R$ 4,742.8 in 2004), represented by 65,876,074 thousand no-par value and
            registered shares (56,277,742 thousand in 2004), comprised of 34,499,423
            thousand common shares and 31,376,651 thousand preferred shares (23,558,245
            thousand and 32,719,497 thousand, respectively, in 2004).
  F-45
  On
            May
            31, 2005, AmBev’s capital stock increased by 27 thousand common shares in the
            amount of R$ 0.004 attributed to CBB’s minority shareholders, merged by the
            Company, as mentioned in note 1 (b)(ii).Additionally, on the same date,
            the
            Company increased the capital stock by 10,941,151 thousand common shares
            in the
            amount of R$ 948.6, by capitalization of goodwill reserve, the shareholders
            being entitled to bonus at the ratio of 1 common share for each 5 shares
            (common
            shares or preferred shares).
  The
            purpose of this share bonus, according to announcement on December 6,
            2004, was
            to maintain the liquidity of the common shares after the mandatory tender
            offer
            for the common shares of AmBev by InBev, held on March 29, 2005.
  As
            mentioned in note 1(b)(iv), the Extraordinary Shareholders’ Meeting as of August
            27, 2004, approved the issue, by the Company, of 19,264,363 thousand
            new shares,
            comprised of 7,866,182 thousand common shares and 11,398,181 thousand
            preferred
            shares, and also decided to appropriate to the capital stock account
            the amount
            of R$ 1,600.7 and to the capital reserve account the amount of
            R$ 12,840.3 as premium on share subscription, which was fully subscribed
            by
            Labatt ApS legal representatives.
  (ii)  Warrants
  During
            the period for the exercise of warrants between April 1 and April 30,
            2003, 25
            thousand common and 489 thousand preferred shares were subscribed, for
            the total
            amount of R$ 0.5. Certain warrant holders have challenged in court the
            CVM’s and Company’s understanding related to the warrant conversion
            criteria.
  (iii)  Share
            rights
  Our
            preferred shares are non-voting but have priority in the return of capital
            in
            the event of liquidation. Our common shares have the right to vote at
            shareholder meetings. Under our by-laws, we are required to distribute
            to
            shareholders as a mandatory dividend in respect of each fiscal year ending
            on
            December 31 an amount not less than 35 % of our net income determined
            under
            Brazilian GAAP, as adjusted in accordance with such law, unless payment
            of such
            amount would be incompatible with AmBev’s financial situation. The mandatory
            dividend includes amounts paid as interest attributed to shareholders’ equity
            (item (e)). Preferred shares are entitled to a dividend premium of 10
            % over
            that received by the common shareholders.
  F-46
  (iv)  Share
            activity (in thousands of shares)
  2005
                  
                  2004
                  
                  2003Preferred
                      shares:At
                      beginning of year
                  
                  
                  32,719,497
                  
                  
                  22,801,455
                  
                  
                  22,824,827Employee
                      stock ownership plan purchases
                  
                  
                  -
                  
                  
                  55,727
                  
                  
                  259,007Acquisition
                      of Labatt
                  
                  
                  -
                  
                  
                  11,398,181
                  
                  
                  -Stock
                      warrants
                  
                  
                  -
                  
                  
                  -
                  
                  
                  489Cancellation
                      of shares
                  
                  
                  (1,342,846
                  )
                  
                  (1,535,866
                  )
                  
                  (282,868
                  )At
                      end of year
                  
                  
                  31,376,651
                  
                  
                  32,719,497
                  
                  
                  22,801,455Common
                      shares:At
                      beginning of year
                  
                  
                  23,558,245
                  
                  
                  15,735,878
                  
                  
                  15,795,903Labatt
                      transaction
                  
                  
                  -
                  
                  
                  7,866,182
                  
                  
                  -Stock
                      warrants
                  
                  
                  -
                  
                  
                  -
                  
                  
                  25Share
                      bonus
                  
                  
                  10,941,151
                  
                  
                  -
                  
                  
                  -Minorities
                      from CBB
                  
                  
                  27
                  
                  
                  -
                  
                  
                  -Cancellation
                      of shares
                  
                  
                  -
                  
                  
                  (43,815
                  )
                  
                  (60,050
                  )At
                      end of year
                  
                  
                  34,499,423
                  
                  
                  23,558,245
                  
                  
                  15,735,878
 b)  Appropriation
            of net income for the year and transfers to statutory reserves
  (i)  Legal
  Under
            Brazilian Corporate Law, AmBev, together with our Brazilian subsidiaries,
            are
            required to appropriate an amount not less than 5% of net income after
            absorbing
            accumulated losses, to a statutory (legal) reserve. The reserve may be
            used to
            increase capital or absorb losses, but may not be distributed as
            dividends.
  (ii)  Investments
  Our
            by-laws permit that we appropriate an amount not lower than 5% and not
            higher
            than 61.75% of our statutory adjusted net income to a reserve for investments,
            in order to finance the expansion of our activities, including subscription
            to
            capital increases or the establishment of new enterprises. This reserve
            cannot
            exceed 80% of our capital stock. Should this limit be reached, a General
            Meeting
            of shareholders must deliberate on the balance, either distributing it
            to
            shareholders or increasing capital.
  (iii) Employee
            profit sharing of up to 10% of net income for the period, based on predetermined
            criteria. Directors are allotted a participation in net income in accordance
            with legal limits. Profit sharing is conditioned to the achievement of
            collective and individual targets, which are established in advance by
            the Board
            of Directors at the beginning of the fiscal year.
  c)  Treasury
            shares
  At
            December 31, 2005 the Company held in treasury 10,480 thousand common
            shares and
            519,380 thousand preferred shares in the total amount of
            R$ 393.4.
  F-47
  The
            Board
            of Directors has successively approved the repurchase of shares, and
            the Company
            is authorized, during renewable periods of up to 90 days, to acquire
            shares
            within certain limits.
  Activity
            in treasury shares during the year was as follows (in thousands):
  2005
                  
                  2004
                  
                  2003Preferred
                      shares:At
                      beginning of year
                  
                  
                  (1,589,604
                  )
                  
                  (520,153
                  )
                  
                  (273,684
                  )Repurchase
                      of shares
                  
                  
                  530,615
                  
                  
                  (2,605,318
                  )
                  
                  (529,337
                  )Transfer
                      to stock ownership plan
                  
                  
                  (257,993
                  )
                  
                  -
                  
                  
                  -Cancellation
                      of shares
                  
                  
                  1,342,846
                  
                  
                  1,535,867
                  
                  
                  282,868At
                      end of year
                  
                  
                  (519,380
                  )
                  
                  (1,589,604
                  )
                  
                  (520,153
                  )Common
                      shares:At
                      beginning of year
                  
                  
                  (60,731
                  )
                  
                  (104,546
                  )
                  
                  (101,131
                  )Repurchase
                      of shares
                  
                  
                  16,869
                  
                  
                  -
                  
                  
                  (63,464
                  )Transfer
                      to stock ownership plan
                  
                  
                  (6,389
                  )
                  
                  -
                  
                  
                  -Shares
                      solf on MTO
                  
                  
                  60,731
                  
                  
                  -
                  
                  
                  -Cancellation
                      of shares
                  
                  
                  -
                  
                  
                  43,815
                  
                  
                  60,049At
                      end of year
                  
                  
                  (10,780
                  )
                  
                  (60,731
                  )
                  
                  (104,546
                  )
  d)  Dividends
            and contributions
  The
            determination of the dividend approved by the Board of Directors from
            net income
            for the year ended December 31 was as follows:
  2005
                  
                  
                  
                  2004
                  
                  2003Net
                      income for the year
                  
                  
                  1,545.7
                  
                  
                  
                  
                  
                  1,161.5
                  
                  
                  1,411.6Legal
                      reserve (5%)
                  
                  
                  -
                  
                  
                  (i)
                  
                  
                  -
                  
                  
                  (70.6
                  )Dividend
                      basis
                  
                  
                  1,545.7
                  
                  
                  
                  
                  
                  1,161.5
                  
                  
                  1,341.0Dividends:Prepaid
                      interim distribution as dividends
                  
                  
                  480.9
                  
                  
                  
                  
                  
                  108.4
                  
                  
                  495.2as
                      interest attributed to shareholders’ equity
                  
                  
                  219.8
                  
                  
                  
                  
                  
                  236.1
                  
                  
                  222.5Supplemental
                      dividends as dividends
                  
                  
                  75.4
                  
                  
                  
                  
                  
                  424.6
                  
                  
                  54.6as
                      interest attributed to shareholders’ equity
                  
                  
                  524.2
                  
                  
                  
                  
                  
                  558.1
                  
                  
                  226.1Withholding
                      tax on interest attributed to shareholders’ equity (generally
                      15%)
                  
                  
                  (111.6
                  )
                  
                  
                  
                  
                  (119.3
                  )
                  
                  (67.3
                  )Total
                      dividends, net of withholding tax
                  
                  
                  1,188.7
                  
                  
                  
                  
                  
                  1,207.9
                  
                  
                  931.1Percentage
                      of dividends to dividend basis
                  
                  
                  76.9
                  
                  
                  
                  
                  
                  103.9
                  
                  
                  69.4Dividends
                      per thousand shares outstanding at year-end, net of withholding
                      tax (in
                      whole*reais*)
                      -
                      R$:Common
                  
                  
                  17.32
                  
                  
                  (ii)
                  
                  
                  20,86
                  
                  
                  23.15Preferred
                  
                  
                  19.05
                  
                  
                  (ii)
                  
                  
                  22,95
                  
                  
                  25.46
  F-48
  (i) We
            did
            not appropriate any amounts to our legal reserve since 2004, based on
            the
            provisions in Brazilian Corporation Law which determine that capital
            reserves
            may be limited to 30 % of the Company’s capital stock.
  (ii) Dividends
            per lot of thousand shares outstanding (excluding treasury shares) at
            year-end -
            before withholding tax (IRRF): common - R$ 18.95 and preferred -
            R$ 20.85.
  e)  Interest
            attributed to shareholders’ equity
  Brazilian
            companies are permitted to pay limited amounts of interest on capital
            to
            shareholders and treat such payments as an expense for Brazilian income
            and
            social contribution tax purposes. This notional interest distribution
            is treated
            for accounting purposes as a deduction from shareholders’ equity in a manner
            similar to a dividend. A 15% tax is withheld and paid by AmBev upon credit
            of
            the interest. Interest attributed to shareholders’ equity is treated as a
            dividend for purposes of the mandatory dividend payable by AmBev.
  f)  Goodwill
            reserve
  As
            mentioned on Note 1(b), as a result of the merger of InBev Brasil into
            AmBev on
            July 28, 2005, the Company recorded a special goodwill reserve (a capital
            reserve) in the amount of R$ 2,833.3 equivalent to the amount of the future
            tax benefit arising from the deductibility of the goodwill
            amortization.
  g)  Stock
            ownership plan
  The
            stock
            ownership plan for the purchase of Company shares (the Plan) is administered
            by
            a committee that includes non-executive members of our Board of Directors.
            This
            committee periodically creates stock ownership programs and sets the
            terms,
            vesting requirements and employees to be included and establishes the
            price at
            which the preferred and common shares are to be issued.
  The
            purchase price cannot be less than 90% of the average price of the shares
            traded
            on the Bovespa in the previous three business days, at the date the award
            is
            granted. The number of shares which may be granted each year under the
            Plan
            cannot exceed 5% of the total number of shares outstanding of each type
            of share
            at that date (shares granted represented 0.00% and 0.02% of total shares
            outstanding in 2005 and 2004, respectively).
  The
            Company may opt to issue new shares, or transfer its treasury shares
            to the
            employee. There is no expiration date for the purchase of the shares.
            The
            Company has the right of first refusal on shares issued under the program
            if (i)
            the employee decides to sell the shares or (ii) the employee ceases to
            be
            employed by the Company, automatically forfeiting the purchase rights.
            The
            Company has the right to repurchase any shares subscribed by the employee
            at a
            price equal to: (i) the price paid by the employee, adjusted by inflation,
            should the shares be sold within the first 30 months following the purchase;
            (ii) 50% at the price paid, adjusted by inflation, and another 50% at
            the market
            price, if the employee sells the shares after the first 30 months but
            before the
            60th month following the purchase; or (iii) at market price if sold at
            least 60
            months following the purchase.
  F-49
  Employees
            who do not apply at least 70% of their annual bonuses, net of income
            tax and
            other charges, to subscribe shares under the stock ownership plan, will
            forfeit
            their purchase rights in the same proportion of the bonuses not applied,
            unless
            the equivalent amount had been previously subscribed in cash by the
            employee.
  For
            plans
            granted prior to 2004, the Company provided advances to employees for
            the
            purchase of shares. Financing arrangements were normally for periods
            of no more
            than four years and accrued 8% interest per annum above the “Índice Geral de
            Preços - Mercado” - IGP-M (Note 2(o)).These advances are guaranteed by the
            shares. On December 31, 2005 these advances totaled R$ 114.9 (R$ 175.2
            in 2004) and are included in the balance sheet as non-current assets.
            For plans
            granted beginning in 2003, the Company no longer provides these
            advances.
  The
            summary of changes in shares included in the Plan for the years ended
            December
            31, 2005 and 2004 is the following:
  2005
                  
                  2004Outstanding
                      (in thousands of shares):At
                      beginning of year
                  
                  
                  651,036
                  
                  
                  733,689Granted
                  
                  
                  -
                  
                  
                  9,000Exercised
                  
                  
                  (264,382
                  )
                  
                  (55,727
                  )Stock-dividend
                  
                  
                  80,636
                  
                  
                  -Cancelled
                  
                  
                  (29,169
                  )
                  
                  (35,926
                  )At
                      year end - outstanding and exercisable
                  
                  
                  438,121
                  
                  
                  651,036Shares
                      available at end of each year that may be granted in the subsequent
                      year
                  
                  
                  3,293,804
                  
                  
                  2,813,887
  17.
                  FINANCIAL
                      INSTRUMENTS AND RISK MANAGEMENT
  a)  Overview
  A
            substantial part of our loans and financing are denominated in foreign
            currency.
            We also have assets in Brazil, Argentina and other South and Central
            American
            countries.
  We
            hold
            certain amounts of cash and cash equivalents denominated in foreign currency,
            and enter into cross-currency interest rate and commodities swap transactions
            and currency forward contracts to hedge against the effects of exchange
            rates
            variations on our consolidated exposure to foreign currency, interest
            rate
            fluctuations, and changes in raw material costs, particularly aluminum,
            sugar
            and wheat.
  Financial
            assets are purchased to hedge against financial liabilities, which does
            not
            prevent the Company from redeeming them at any time, even though its
            real intent
            is to carry such assets to maturity on their respective due dates.
  b)  Derivative
            financial instruments
  Volatility
            of interest rates, exchange rates and commodity prices are the principal
            market
            risks to which we are exposed and which we manage through derivative
            instruments
            to mitigate exposure to risk.
  F-50
  We
            monitor and evaluate our derivative positions on a daily basis and adjust
            our
            strategy in response to market conditions. We also periodically review
            the
            credit limits and creditworthiness of our counter parties in these transactions.
            In view of our policies and practices established for derivatives, management
            considers the occurrence of non-measurable risk situations as
            unlikely.
  The
            notional outstanding amounts do not represent amounts exchanged by the
            parties
            and, thus, are not a measure of our exposure through the use of derivatives.
            The
            amounts exchanged during the term of the derivatives are calculated on
            the basis
            of the notional amounts and the other contractual conditions of the derivatives,
            which relate to interest rates and foreign currency exchange rates.
  The
            estimated fair value amounts of our derivatives exposures as of December
            31,
            were as follows:
  Financial
                      instrument
                  
                  2005
                  
                  2004Foreign
                      currency:R$/
                      US$
                  
                  
                  3,610.4
                  
                  
                  3,929.6PEN/US$
                  
                  
                  210.7
                  
                  
                  -ARS/US$
                  
                  
                  206.0
                  
                  
                  132.9CAD /US$
                  
                  
                  240.5
                  
                  
                  299.0Interest
                      rate:Floating
                      LIBOR/ fixed LIBOR
                  
                  
                  -
                  
                  
                  55.7CDI/Fixed
                      interest rate
                  
                  
                  (186.3
                  )
                  
                  -Fixed
                      interest rate/ Canadian BA
                  
                  
                  367.1
                  
                  
                  943.2Commodities:Wheat
                  
                  
                  16.1
                  
                  
                  2.3Aluminum
                  
                  
                  119.6
                  
                  
                  13.2Sugar
                  
                  
                  31,5
                  
                  
                  60.34,615.6
                  
                  
                  5,436.2
  (i) Market
            Value of Financial Instruments - currency and interest rate hedge
  Interest
            rate risk mainly relate to debt borrowed at floating rates. The foreign
            currency
            debt is largely subject to fluctuations in the LIBOR. The portion of
            local
            currency denominated debt that is subject to floating rates is linked to the
            TJLP. We use derivative instruments to mitigate the effects of volatility
            of the
            LIBOR rate.
  As
            of
            December 31, 2005, unrealized gains on variable earnings from financial
            instruments were limited to the lower value between the instrument’s yield curve
            and their relative market value, in accordance with the Brazilian Corporation
            Law.
  Had
            the
            company recorded its derivative instruments at market value, it would
            have
            recorded, for the period ended December 31, 2005, an additional gain
            of
            R$ 44.4 (R$ 189.0 on December 31, 2004), as presented
            below:
  F-51
  Financial
                      instruments
                  
                  Book
                    value
                  
                  Market
                    value
                  
                  Unrealized
                    gainPublic
                      bonds
                  
                  
                  299.2
                  
                  
                  318.9
                  
                  
                  19,7Swaps/forwards
                  
                  
                  (164.8
                  )
                  
                  (150.4
                  )
                  
                  14.4“Cross
                      currency Interest rate Swap” (*)
                  
                  
                  (95.8
                  )
                  
                  (85.6
                  )
                  
                  10.338.6
                  
                  
                  82.9
                  
                  
                  44.4
  (*)  Swaps
            of
            Labatt Canada for the conversion of the Notes taken at fixed interest
            in US
            dollars for fluctuating interest in Canadian dollars.
  The
            fair
            values of investments are estimated based on quoted market prices. For
            investments for which there are no quoted market prices, fair values
            are derived
            from available yield curves for investments of similar maturity and
            terms.
  (ii)  Currency
            and commodities hedge
  At
            December 31, 2005, losses totaling R$ 34.4 (Gain of R$ 45.3 in 2004),
            arising from these instruments obtained for the specific purpose of mitigating
            our exposure to fluctuations in foreign currencies and the prices of
            raw
            materials to be purchased, were deferred, and will be recognized in income
            when
            corresponding product is sold or at the moment when the corresponding
            expense is
            recognized in earnings.
  During
            the years ended December 31, 2005 and 2004, the following effects arising
            from
            such instruments were recorded in earnings under Cost of sales:
  Gain
                      (loss) recorded
                    in cost of salesDescription
                  
                  2005
                  
                  2004Currency
                  
                  
                  (268.1
                  )
                  
                  (9.1
                  )Sugar
                  
                  
                  15.3
                  
                  
                  6.6Wheat
                      and corn
                  
                  
                  (0.5
                  )
                  
                  (0.1
                  )Aluminum
                  
                  
                  3.8
                  
                  
                  10.9(249.5
                  )
                  
                  8.3
  c)  Financial
            liabilities
  The
            Company’s financial liabilities, represented mainly by Bonds 2013 and 2011,
            Syndicated Loan and import financings, are stated at cost plus accrued
            interest
            and monetary and exchange variations, based on closing rates and indices.
  Had
            the
            Company recorded its financial liabilities at market values, it would
            have
            recorded an additional loss, before income taxes, of approximately
            R$ 523.4, on December 31, 2005 (loss of R$ 602.6 in 2004 and a gain of
            R$ 202.2 in 2003), as presented in the table below:
  F-52
  Financial
                      liabilities
                  
                  Book value
                  
                  Market value
                  
                  Difference“Bonds”
                      - AmBev 11 and AmBev 13
                  
                  
                  2,381.9
                  
                  
                  2,867.9
                  
                  
                  (486.0
                  )Series
                      A Notes (i)
                  
                  
                  379.1
                  
                  
                  392.9
                  
                  
                  (13.8
                  )Series
                      B Notes (ii)
                  
                  
                  100.6
                  
                  
                  104.7
                  
                  
                  (4.1
                  )Senior
                      Notes - BRI (iii)
                  
                  
                  178.6
                  
                  
                  202.8
                  
                  
                  (24.2
                  )Other
                      currency international financing (iv)
                  
                  
                  2,827.5
                  
                  
                  2,827.5
                  
                  
                  -Financing
                      in R$ (iv)
                  
                  
                  328.3
                  
                  
                  328.3
                  
                  
                  -BNDES/FINEP/EGF
                      (iv)
                  
                  
                  466.4
                  
                  
                  466.4
                  
                  
                  -Res.
                      63/ Compror 63
                  
                  
                  541.1
                  
                  
                  536.4
                  
                  
                  4.77,203.5
                  
                  
                  7,726.9
                  
                  
                  (523.4
                  )
  (i)  Series
            A
            notes executed by Labatt Canada in US dollars.
  (ii)  Series
            B
            notes executed by Labatt Canada in Canadian dollars.
  (iii)  Private
            Bonds executed by Brewers Retail Inc. (BRI) and proportionally consolidated
            by
            Labatt Canada in Canadian dollars.
  (iv)  Loans
            for
            which book value and market value are similar.
  The
            criteria used to estimate the market value of the financial liabilities
            was
            carried out based on quotations of investment brokers, on quotations
            from banks
            that render services to AmBev and Labatt Canada and at the secondary
            market
            value of securities on the base date as of December 31. The Bonds, approximately
            124.5% of face value for Bond 2011 and 117.5% for Bond 2013 and the Series
            A
            Notes and Series B Notes of Labatt Canada, the prices were calculated
            based on
            the cash flow discounted at present value, using market rates available
            for
            Labatt Canada for similar instruments.
  d)  Concentration
            of credit risk
  We
            sell
            to distributors, supermarket and retailers, within a broad distribution
            network.
            Credit risk is reduced as a result of the large number of customers and
            control
            procedures that monitor the creditworthiness of distributors and customers.
            Historically, we have not experienced significant losses on receivables
            from
            customers. In order to minimize the credit risk of its investments, the
            Company
            has adopted procedures for the allocation of cash and investments, taking
            into
            consideration loan limits and appraisals of financial institutions, not
            allowing
            concentration, i.e., the loan risk is monitored and minimized for the
            negotiations are carried out only with a select group of counterparties
            highly
            qualified. Labatt Canada enters compensation agreements with its counterparties,
            allowing them to terminate financial assets and liabilities contracts
            in the
            event of default.
  F-53
  e)  Financial
            income (expense)
  2005
                  
                  2004
                  
                  2003Financial
                      income:Realized
                      and unrealized gain from derivative instruments
                  
                  
                  -
                  
                  
                  -
                  
                  
                  21.6Foreign
                      exchange gains (losses) on investments
                  
                  
                  389.1
                  
                  
                  208.6
                  
                  
                  427.1Financial
                      income on cash equivalents
                  
                  
                  85.5
                  
                  
                  175.2
                  
                  
                  233.7Interest
                      on taxes, restricted deposits for legal proceedings
                  
                  
                  10.1
                  
                  
                  11.6
                  
                  
                  77.4Income
                      of action plan
                  
                  
                  7.6
                  
                  
                  34.4
                  
                  
                  -Other
                  
                  
                  28.9
                  
                  
                  38.8
                  
                  
                  68.1521.2
                  
                  
                  468.6
                  
                  
                  827.9Financial
                      expenses:Realized
                      and unrealized losses from derivative instruments
                  
                  
                  (714.3
                  )
                  
                  (412.3
                  )
                  
                  -Interest
                      and charges on loans
                  
                  
                  (630.1
                  )
                  
                  (592.6
                  )
                  
                  (474.5
                  )Tax
                      on financial transactions
                  
                  
                  (135.8
                  )
                  
                  (121.3
                  )
                  
                  (90.9
                  )Interest
                      on contingencies and other
                  
                  
                  (65.3
                  )
                  
                  (54.0
                  )
                  
                  (95.4
                  )Other
                  
                  
                  (62.5
                  )
                  
                  (64.7
                  )
                  
                  (74.0
                  )(1,607,9
                  )
                  
                  (1,244.9
                  )
                  
                  (734.8
                  )Total
                  
                  
                  (1,086.7
                  )
                  
                  (776.3
                  )
                  
                  93.1
  18.
                  INCOME
                      TAXES
  a)  Tax
            rates
  Income
            taxes in Brazil comprise federal income tax (25%) and social contribution
            (9%)
            (a federal tax on income) which, combined, provide a composite statutory
            rate of
            34%. There are no taxes levied by state or local authorities on income
            in
            Brazil. The Company is subject to taxes from its operations in foreign
            jurisdictions.
  b)  Income
            tax reconciliation
  2005
                  
                  2004
                  
                  2003Income
                      before income taxes, profit sharing and contributions and minority
                      interest
                  
                  
                  2,576.8
                  
                  
                  1,829.5
                  
                  
                  1,864.2Deduct:
                      profit sharing and contributions
                  
                  
                  (202.8
                  )
                  
                  (152.4
                  )
                  
                  (23.6
                  )Income
                      before taxes on income
                  
                  
                  2,374.0
                  
                  
                  1,677.1
                  
                  
                  1,840.6Tax
                      expense at statutory rates - 34%
                  
                  
                  (807.2
                  )
                  
                  (570.2
                  )
                  
                  (625.8
                  )
  F-54
  2005
                  
                  2004
                  
                  2003Adjustments
                      to derive effective benefit (expense):Benefit
                      from deductibility of interest attributed to shareholders’
                      equity
                  
                  
                  253.0
                  
                  
                  270.0
                  
                  
                  152.7Tax
                      losses carryforwards from previous years (i)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  147.9Non-taxable
                      gains from tax incentives in subsidiaries (Note 2(x))
                  
                  
                  51.6
                  
                  
                  65.7
                  
                  
                  59.8Realization
                      of goodwill upon merger of subsidiary
                  
                  
                  -
                  
                  
                  (12.4
                  )
                  
                  37.1Non-deductible
                      losses on exclusive funds
                  
                  
                  -
                  
                  
                  (39.5
                  )
                  
                  -Foreign
                      earnings not subject to tax
                  
                  
                  (174.1
                  )
                  
                  (66.1
                  )
                  
                  (183.0
                  )Non-deductible
                      goodwill amortization (ii)
                  
                  
                  (211.4
                  )
                  
                  (197.5
                  )
                  
                  (21.2
                  )Goodwill
                      future profitability-CBB merger (iii)
                  
                  
                  103.4
                  
                  
                  -
                  
                  
                  -Exchange
                      rate variation on foreign subsidiaries
                  
                  
                  (44.3
                  )
                  
                  85.0
                  
                  
                  (6.8
                  )Other
                      non-taxable income, net
                  
                  
                  (16.1
                  )
                  
                  (46.8
                  )
                  
                  13.2Tax
                      benefit (expense) per statement of operations
                  
                  
                  (845.1
                  )
                  
                  (511.8
                  )
                  
                  (426.1
                  )
  (i) We
            acquired Pepsi in October 1997 including net operating tax losses available
            for
            offset. Pursuant to the purchase agreement, in the event we had used
            such tax
            losses within a five-year period from the date of purchase, we would
            have been
            required to reimburse 80% of these amounts to the seller. Although this
            clause
            expired on October 21, 2002, we had not recorded the remaining 80% of
            the Pepsi
            tax asset, totaling R$ 148.0 as management was not fully confident, that
            the asset met the probable recoverability test under CVM Instruction
            No. 273/98
            and 271/02.
  (ii) This
            value considers the goodwill amortization effects of Labatt ApS in Labatt
            Canada, according to note 20, generating a tax effect as it is not deductible,
            at the amount of R$ 314.0 (R$ 139.3 on December 31,
            2004).
  (iii) This
            value refers to the tax credit derived from future deductibility of AmBev’s
            goodwill in CBB, as a result of CBB merger by AmBev (note
            1(b)(ii)).
  Composition
            of benefit (expense) of Income Tax and CSLL:
  2005
                  
                  2004
                  
                  2003Current
                  
                  
                  (757.1
                  )
                  
                  (740.6
                  )
                  
                  (624.4
                  )Deferred
                  
                  
                  (88.0
                  )
                  
                  228.8
                  
                  
                  198.3Total
                  
                  
                  (845.1
                  )
                  
                  (511.8
                  )
                  
                  (426.1
                  )
  F-55
 
 The
            major
            components of the deferred tax asset and liability accounts are as
            follows:
  2005
                  
                  2004Long
                      term assetsTax
                      losses carryforwards
                  
                  
                  896.9
                  
                  
                  1,049.2Temporary
                      differences:Non-deductible
                      provisions
                  
                  
                  422.7
                  
                  
                  491.3Provision
                      for interest attributed to shareholders’ equity (*)
                  
                  
                  -
                  
                  
                  190.0Goodwill
                      future profitability - Merger
                  
                  
                  132.6
                  
                  
                  -Provision
                      for restructuring
                  
                  
                  46.4
                  
                  
                  66.4Provision
                      for medical assistance benefits
                  
                  
                  165.9
                  
                  
                  194.8Provision
                      on employees profit sharing
                  
                  
                  47.8
                  
                  
                  35.2Provision
                      for losses on hedge
                  
                  
                  116.9
                  
                  
                  -Provision
                      for marketingand
                      sales expenses
                  
                  
                  51.6
                  
                  
                  34.4Other
                  
                  
                  161.2
                  
                  
                  155.32,042.0
                  
                  
                  2,216.6Long-term
                      liabilitiesTemporary
                      differencesAccelerated
                      depreciation
                  
                  
                  59.9
                  
                  
                  100.5Other
                  
                  
                  34.7
                  
                  
                  38.094.6
                  
                  
                  138.5
  (*)  Interest
            attributed to shareholders’ equity are considered deductible only when
            effectively credited to shareholders.
  c)  Net
            operating loss carryforwards
  Deferred
            tax assets are limited to the amount for which offset is supported by
            profit
            projections for the next ten years, discounted to present value, according
            to
            CVM Instructions No. 273/98 and No. 271/02.
  Net
            deferred income tax assets comprise Brazilian net operating losses, which
            have
            no expiration dates, available for offset against future taxable income.
            Brazilian carryforward losses are available for offset of up to 30% of
            annual
            income before tax in any year. Tax losses are not inflation-indexed.
  Based
            on
            projections of future taxable income, the estimated recovery of income
            tax and
            social contribution loss carryforwards is as follows:
  2006
                  
                  
                  472007
                  
                  
                  962008
                  
                  
                  1362009
                  
                  
                  1872010
                  
                  
                  2292011
                  
                  
                  202897
  F-56
  It
            is
            estimated that the balance of deferred taxes on temporary differences
            as of
            December 31, 2005 will be realized until the fiscal year 2011. However,
            it is
            not possible to accurately estimate when such temporary differences will
            be
            realized, because the major part of them depends on legal decisions,
            over which
            the Company has no control nor any means of anticipating exactly when
            a final
            decision will be reached.
  The
            projections of future taxable income include various estimates on the
            performance of the Brazilian and the global economy, the determination
            of
            foreign exchange rates, sales volume, sales prices, tax rates, and other
            factors
            that may differ from the data and actual values.
  Since
            the
            income tax and social contribution derive not only from taxable income
            but also
            depend on the Company’s tax and corporate structure, the existence of
            non-taxable income, non-deductible expenses, tax exemption and incentives,
            and
            other variables, there is no relevant correlation between net income
            and the
            determination of income tax and social contribution. Therefore, we recommend
            that the tax loss carryforwards should not be taken as an indicator of
            future
            profits.
  Tax
            loss
            carryforwards available for offset arising from operations in Argentina,
            Venezuela, Uruguay and Paraguay totaling R$ 184.0, expire through 2007.
            Recovery of these tax losses is not considered to be more likely than
            not based
            on current estimates at December 31, 2005 and, accordingly, we have not
            recorded
            these assets.
  19.
                  COMMITMENTS
                      WITH SUPPLIERS
  The
            Company has agreements with certain suppliers to acquire certain quantities
            of
            materials that are important for the production and packaging processes,
            such as
            malt, plastics for PET bottles, aluminum and natural gas.
  The
            Company has commitments assumed with suppliers for 2006 and 2007, already
            contracted on December 31, 2005 at the amount of approximately R$ 533.4 and
            R$ 3.3, respectively.
  20.
                  OTHER
                      OPERATING INCOME (EXPENSES), NET
  2005
                  
                  2004
                  
                  2003Operating
                      income:Gain
                      on tax incentive programs in subsidiaries
                  
                  
                  151.8
                  
                  
                  193.3
                  
                  
                  175.9Foreign
                      exchange and inflation accounting gains on subsidiaries abroad
                      (i)
                  
                  
                  74.1
                  
                  
                  252.4
                  
                  
                  -Recovery
                      of taxes and contributions
                  
                  
                  52.6
                  
                  
                  14.2
                  
                  
                  24.6Gain
                      on the settlement of tax incentives
                  
                  
                  28.3
                  
                  
                  21.9
                  
                  
                  16.6Other
                  
                  
                  3.6
                  
                  
                  22.9
                  
                  
                  23.5310.4
                  
                  
                  504.7
                  
                  
                  240.6
  F-57
  2005
                  
                  2004
                  
                  2003Operating
                      expenses:Amortization
                      of goodwill (ii)
                  
                  
                  (1.342.9
                  )
                  
                  (803.6
                  )
                  
                  (252.4
                  )Foreign
                      exchange and inflation accounting losses on subsidiaries
                      abroad
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (142.4
                  )Taxes
                      on other income
                  
                  
                  (3.5
                  )
                  
                  (67.5
                  )
                  
                  (31.2
                  )Other
                  
                  
                  (39.4
                  )
                  
                  (54.5
                  )
                  
                  (54.7
                  )(1,385.8
                  )
                  
                  (925.6
                  )
                  
                  (480.7
                  )Operating
                      income (expenses), net
                  
                  
                  (1,075.4
                  )
                  
                  (420.9
                  )
                  
                  (240.1
                  )
  (i)  Effect
            of
            the exchange variation over the investment in Labatt ApS.
  (ii)  The
            goodwill of Labatt Canada resulted in an amortization expense of R$ 923.4
            (R$ 409.7 in the period between August 27, 2004 and December 31,
            2004).
  21.
                  NON-OPERATING
                      INCOME (EXPENSES), NET
  2005
                  
                  2004
                  
                  2003Non-operating
                      income:Reversal
                      of provision for loss on property, plant and equipment
                  
                  
                  -
                  
                  
                  13.2
                  
                  
                  -Gain
                      on disposal of property, plant and equipment
                  
                  
                  24.9
                  
                  
                  53.5
                  
                  
                  38.5Other
                  
                  
                  15.6
                  
                  
                  9.1
                  
                  
                  5.640.5
                  
                  
                  75.8
                  
                  
                  44.1Non-operating
                      expenses:Asset
                      impairments, miscellaneous investment write-offs and other
                  
                  
                  (58.6
                  )
                  
                  (10.4
                  )
                  
                  (58.7
                  )Provision
                      for restructuring
                  
                  
                  (114.9
                  )
                  
                  (198.7
                  )
                  
                  -Loss
                      of interest ownership in subsidiaries
                  
                  
                  (64.9
                  )
                  
                  (80.8
                  )
                  
                  (33.3
                  )Loss
                      on disposal of property, plant and equipment
                  
                  
                  (19.0
                  )
                  
                  (97.8
                  )
                  
                  (25.8
                  )Other
                  
                  
                  (17.4
                  )
                  
                  (22.0
                  )
                  
                  (27.0
                  )(274,8
                  )
                  
                  (409.7
                  )
                  
                  (144.8
                  )Non-operating
                      income (expenses), net
                  
                  
                  (234,3
                  )
                  
                  (333.9
                  )
                  
                  (100.7
                  )
  22.
                  INSURANCE
  At
            December 31, 2005, the main assets of the Company and its subsidiaries,
            such as
            property, plant and equipment and inventories, are insured against fire
            and
            other risks, at replacement value. Insurance coverage is higher than
            the book
            values.
  F-58
  23.
                  SUMMARY
                      OF PRINCIPAL DIFFERENCES BETWEEN BRAZILIAN GAAP AND US GAAP
                      (restated)
  a)
                  Description
                      of the GAAP differences
  The
            Company’s accounting policies comply with and its consolidated financial
            statements have been prepared in accordance with, accounting principles
            set
            forth in Brazilian GAAP. The Company has elected to use its Brazilian
            GAAP
            financial statements as its primary financial statements.
  A
            summary
            of the Company’s principal accounting policies that differ significantly from US
            GAAP is set forth below.
  (i)  Supplementary
            inflation restatement in 1996 and 1997 for US GAAP
  Under
            Brazilian GAAP, inflation accounting was discontinued effective January
            1, 1996.
            Prior to that date, Brazilian GAAP statements included indexation adjustments
            which partially accounted for the effect of inflation on property, plant
            and
            equipment, investments, deferred charges (collectively referred to as
“Permanent
            assets”) and shareholders’ equity, and reported the net charge or credit in the
            statement of operations. However, under US GAAP, Brazil ceased to be
            treated as
            a highly inflationary economy only from January 1, 1998. Therefore the
            financial
            information for purposes of US GAAP for the two-year period ended December
            31,
            1997 include additional inflation restatement adjustments made by applying
            the
            IGP-M to permanent assets and shareholders’ equity.
  Shareholders’
            equity under US GAAP was increased by R$ 45.9, R$ 62.8 and
            R$ 120.1 at December 31, 2005, 2004 and 2003, respectively, due to the
            additional inflation restatement adjustments, net of depreciation.
  F-59
  (ii)  Reversal
            of inflation restatement adjustment on foreign subsidiaries
  Under
            Brazilian GAAP, the financial statements of our subsidiaries operating
            in
            Argentina and Venezuela include inflation accounting adjustments for
            certain
            periods. For purposes of US GAAP, neither of these countries was considered
            to
            be highly inflationary for the years presented and, accordingly, amounts
            are
            reported based on nominal local currency balances translated to Brazilian *reais* at the
            period-end exchanges rates for balance sheet accounts and average rates
            for the
            year for statements of operations and cash flows.
  Shareholders’
            equity under US GAAP was reduced by R$ 21.4, R$ 13.0 and R$ 116.0
            at December 2005, 2004 and 2003, respectively, due to the reversal of
            the
            inflation restatement adjustments.
  (iii)  Property,
            plant and equipment
  ·
                  Capitalized
                      interest
  Under
            Brazilian GAAP, prior to January 1, 1997 there was no accounting standard
            requiring capitalization of interest as part of the cost of the related
            assets.
            Under US GAAP, capitalization of the financial costs of borrowed funds,
            excluding foreign exchange losses, during construction of major facilities
            is
            recognized as part of the cost of the related assets.
  For
            reconciliation purposes, an increase in shareholders’ equity due to capitalized
            interest, net of amortization effects was recorded recorded in the amount
            of
            R$ 10.2 in 2005, R$ 10.9 in 2004 and R$ 7.6 in 2003.
  ·
                  Impairment
  Under
            Brazilian GAAP, companies are required to determine if operating income
            is
            sufficient to absorb the depreciation of long-lived assets in order to
            assess
            potential asset impairment. In the event such operating income is insufficient
            to recover the depreciation, the assets, or groups of assets, are written
            down
            to recoverable values, preferably, based on the projected discounted
            cash flows
            of future operations. In the event of a planned substitution of assets
            prior to
            the end of the original estimated useful life of the asset, depreciation
            of such
            asset is accelerated to ensure that the asset is depreciated according
            to
            estimated net realizable values at the estimated date of
            substitution.
  Under
            US
            GAAP, SFAS No. 144, *Accounting
            for the Impairment or Disposal of Long-lived Assets* ,
            requires companies to evaluate the carrying value of long-lived assets
            to be
            held and used, and for long-lived assets to be disposed of, when events
            and
            circumstances require such a review. The carrying value of long-lived
            assets is
            considered impaired when the expected undiscounted cash flow from identified
            asset groups, representing the lowest level for which identifiable cash
            flow are
            largely independent of the cash flows of other groups of assets, is less
            than
            their carrying value. In that event, a loss is recognized based on the
            amount by
            which the carrying value exceeds the fair market value of the assets
            or
            discounted cash flows generated by the assets.
  F-60
  (iv)  Deferred
            charges
  Brazilian
            GAAP permits deferral of acquisition and implementation of software,
            payments
            made to distributors (recorded as Other intangible assets) and preoperating
            expenses incurred in the construction or expansion of a new facility
            until the
            facility begins operations.
  For
            US
            GAAP reconciliation purposes, deferred amounts related to preoperating
            expenses
            incurred in the construction or expansion of a new facility do not meet
            the
            conditions established for deferral and accordingly have been charged
            to
            income.
  For
            reconciliation purposes, deferred charges expensed under US GAAP, net
            of
            amortization effects, amounted to R$ 100.1 in 2005, R$ 143.9 in 2004
            and R$ 138.2 in 2003.
  (v)  Business
            combinations
  Under
            Brazilian GAAP, goodwill arises from the difference between the amount
            paid and
            the Brazilian GAAP book value (normally also the tax basis) of the net
            assets
            acquired. This goodwill is normally attributed to the difference between
            the
            book value and the market value of assets acquired or justified based
            on
            expectation of future profitability and is amortized over the remaining
            useful
            lives of the assets or up to ten years. Negative goodwill arises under
            Brazilian
            GAAP when the book value of assets acquired exceeds the purchase consideration;
            negative goodwill is not generally amortized but is realized upon disposal
            of
            the investment.
  Under
            US
            GAAP, fair values are assigned to acquired assets and liabilities in
            business
            combinations, including intangible assets and unallocated goodwill. Under
            US
            GAAP goodwill is not amortized but, instead, is assigned to an entity’s
            reporting unit and tested for impairment at least annually. The differences
            in
            relation to Brazilian GAAP arise principally from the measurement of
            the
            consideration paid under US GAAP using the fair value of shares and put
            options
            issued, and the effects of amortization which are no longer recorded
            for US GAAP
            purposes.
  For
            Brazilian GAAP purposes, the net balance of goodwill at December 31,
            2005 was
            R$ 16,744.8 (R$ 18,345.5 in 2004), which is being amortized to income
            over a period of up to 10 years; negative goodwill at December 31, 2005
            was
            R$ 172.5 (R$ 175.1 in 2004).
  For
            US
            GAAP purposes, the net balance of goodwill at December 31, 2005 is
            R$ 13,467.7 (R$ 13,418.9 in 2004), excluding goodwill arising from the
            acquisition of Quinsa, which is accounted for under the equity
            method.
  During
              2004, as a result of the decision from the Brazilian antitrust authorities
              that
              AmBev must sell its Marathon brand, we recorded an impairment provision
              totaling
              R$ 26.1. No impairment charge was recorded in our Brazilian GAAP records.
  F-61
 
 The
            following significant business combinations have generated differences
            in
            accounting between Brazilian GAAP and US GAAP:
  2005
                    
                    2004
                    
                    2003(Restated)
                    
                    (Restated)Differences
                        in net income:The
                        Labatt transaction:US
                          GAAP adjustments, net after tax
                    
                    
                    139.0
                    
                    
                    58.1
                    
                    
                    -Depreciation
                        of purchase accounting adjustmentsallocated
                        to tangible and intangible assets acquired
                    
                    
                    (63.1
                    )
                    
                    (23.5
                    )
                    
                    -Employee
                        future benefits
                    
                    
                    44.2
                    
                    
                    26.5
                    
                    
                    -Income
                        tax effect on purchase accounting adjustments
                    
                    
                    6.4
                    
                    
                    (1.0
                    )Goodwill
                        adjustments
                    
                    
                    923.5
                    
                    
                    405.0
                    
                    
                    -Cumulative
                        translation adjustment
                    
                    
                    (164.5
                    )
                    
                    (75.3
                    )
                    
                    -885.5
                    
                    
                    389.8The
                        Quinsa transaction:US
                          GAAP adjustments, net after tax
                    
                    
                    45.5
                    
                    
                    (11.1
                    )
                    
                    -Depreciation
                        of purchase accounting adjustmentsallocated
                        to tangible and intangible assets acquired
                    
                    
                    (29.8
                    )
                    
                    (57.9
                    )
                    
                    (35.8
                    )Fair
                        value adjustment of put option
                    
                    
                    (209.2
                    )
                    
                    (97.0
                    )
                    
                    (135.2
                    )Income
                        tax effect on purchase accounting adjustments
                    
                    
                    81.3
                    
                    
                    43.4
                    
                    
                    -Goodwill
                        adjustments
                    
                    
                    168.9
                    
                    
                    268.5
                    
                    
                    84.8Cumulative
                        translation adjustment
                    
                    
                    97.0
                    
                    
                    76.6
                    
                    
                    157.1153.7
                    
                    
                    222.5
                    
                    
                    70.9The
                        Antarctica transaction:Amortization
                        of goodwill
                    
                    
                    35.3
                    
                    
                    84.7
                    
                    
                    84.7Amortization
                        of goodwill allocated to tangible assetsand
                        deferred charges
                    
                    
                    49.4
                    
                    
                    -
                    
                    
                    -Depreciation
                        of purchase price adjustments
                    
                    
                    19.2
                    
                    
                    19.2
                    
                    
                    (12.2
                    )Amortization/write-off
                        of US GAAP intangibles
                    
                    
                    (10.2
                    )
                    
                    (11.9
                    )
                    
                    (64.5
                    )93.7
                    
                    
                    92.0
                    
                    
                    8.0Other
                        acquisitions (principally reversal of amortization)
                    
                    
                    30.8
                    
                    
                    21.8
                    
                    
                    24.6Business
                        combinations adjustments (Note 23 a(v))
                    
                    
                    1,163.7
                    
                    
                    726.0
                    
                    
                    103.5
 
 F-62
  2005
                  
                  2004
                  
                  2003(Restated)
                  
                  (Restated)Differences
                      in shareholders’ equity:The
                      Labatt transaction:US
                        GAAP Adjustments
                  
                  
                  2,405.2
                  
                  
                  2,624.5
                  
                  
                  -Goodwill’s
                      adjustments
                  
                  
                  (5,248.5
                  )
                  
                  (5,950.0
                  )
                  
                  -Fair
                      value adjustments of tangible and intangible assets
                  
                  
                  5,405.2
                  
                  
                  5,603.2
                  
                  
                  -Employee
                      future benefits
                  
                  
                  (229.2
                  )
                  
                  (277.5
                  )
                  
                  -Cumulative
                      translation adjustments
                  
                  
                  (54.0
                  )
                  
                  (306.7
                  )
                  
                  -Income
                      tax effect on adjustments
                  
                  
                  (1,734.6
                  )
                  
                  (1,784.0
                  )
                  
                  -544.1
                  
                  
                  (90.5
                  )
                  
                  -The
                      Quinsa transaction:Fair
                      value adjustment of tangible and intangible assets
                  
                  
                  (85.9
                  )
                  
                  20.6
                  
                  
                  (35.8
                  )Fair
                      value adjustment of put option
                  
                  
                  (441.4
                  )
                  
                  (232.2
                  )
                  
                  (135.2
                  )Income
                      tax effect on adjustment
                  
                  
                  (29.1
                  )
                  
                  (42.8
                  )
                  
                  -Goodwill
                      adjustments
                  
                  
                  556.6
                  
                  
                  244.0
                  
                  
                  84.8Cumulative
                      translation adjustment
                  
                  
                  11.5
                  
                  
                  12.2
                  
                  
                  (6.8
                  )69.9
                  
                  
                  1.8
                  
                  
                  (93.0
                  )The
                      Antarctica transaction:Goodwill
                  
                  
                  28.6
                  
                  
                  (355.4
                  )
                  
                  (440.3
                  )Fair
                      value of tangible and intangible assets
                  
                  
                  (174.8
                  )
                  
                  115.5
                  
                  
                  108.4(146.2
                  )
                  
                  (239.9
                  )
                  
                  (331.9
                  )Roll-up
                      of Brahma minority shareholders
                  
                  
                  149.9
                  
                  
                  149.9
                  
                  
                  149.9Other
                      acquisitions
                  
                  
                  72.6
                  
                  
                  41.6
                  
                  
                  19.9222.3
                  
                  
                  191.5
                  
                  
                  169.8Business
                      combinations adjustments (Note 23 a(v))
                  
                  
                  690.1
                  
                  
                  (137.1
                  )
                  
                  (255.1
                  )
 
 ·
                  The
                      Labatt transaction
  *Description
            of the transaction*
  As
            described on Note 1, on March 3, 2004, AmBev entered into an agreement
            through
            which an indirect holding company of Labatt would be merged into AmBev.
            AmBev
            issued to InBev, the former owner of Labatt, approximately 7.9 billion
            AmBev
            common shares and 11.4 billion AmBev preferred shares.
  On
            August
            27, 2004, with the completion of these transactions, Labatt became a
            wholly
            owned subsidiary of AmBev;
  F-63
  *Brazilian
            GAAP accounting treatment*
  Under
            Brazilian GAAP, the incorporation of Labatt was accounted for as a pooling
            of
            interest. AmBev incorporated a holding company, Labatt ApS at fair value.
            The
            only significant asset of Labatt ApS was its investment in Labatt
            Canada.
  For
            Brazilian GAAP purposes, AmBev issued shares in an amount equivalent
            to the fair
            value of Labatt ApS. Goodwill arising from the acquisition of Labatt
            totalled R$
            16,383.3 at August 27, 2004.
  *US
            GAAP accounting treatment*
  The
            AmBev-Labatt transaction constitutes a business combination as defined
            in SFAS
            141, Business
            Combinations (SFAS
            141). In accordance with SFAS 141, we are required to identify the acquiring
            entity, AmBev or Labatt, in order to apply the purchase method of accounting
            to
            the other entity. Paragraph 17 of SFAS 141 lists specific criteria that
            should
            be considered in determining the acquiring entity; all facts and circumstances
            are to be considered, with no one criterion determinative.
  The
            paragraph 17 criteria relevant to our identification of the acquiring
            entity
            were: (1) which group of former owners retained or acquired the larger
            portion
            of the voting rights in the combined entity (with consideration given
            to the
            existence of any unusual or special voting arrangements), (2) which group
            of
            owners has the ability to elect or appoint a voting majority of the governing
            body of the combined entity, (3) which entity’s senior management dominates the
            combined entity, and (4) which entity paid a premium over market value
            for the
            securities of the other entity. AmBev must identify the acquiring entity
            through
            an analysis of the specified factors under paragraph 17. The Company ́s analysis
            of the relevant factors follows:
  (i)  InBev,
            the former shareholder of Labatt, acquired a majority of the voting interest
            in
            AmBev. However, two special voting arrangements exist. First, the Braco
            Group,
            comprised of former shareholders of AmBev before the transaction (Messrs.
            Lemann, Telles and Sicupira), became an interest holder in the Stichting
            and a
            party to the InBev Shareholders’ Agreement with the Interbrew Founding Families.
            Under this agreement, both the Braco Group and the Interbrew Founding
            Families
            have equal influence over the activities of the Stichting, which controls
            the
            manner in which InBev’s majority voting interest in AmBev is voted. Each of the
            Braco Group and the Interbrew Founding Families is entitled to appoint
            four
            members to the Stichting board of directors and four members to InBev’s board of
            directors (with the four to six remaining members of InBev’s board of directors
            being independent directors). Any action of the Stichting board of directors
            requires the affirmative vote of a majority of the directors present,
            including
            at least two directors appointed by the Braco Group and two directors
            appointed
            by the Interbrew Founding Families. All matters submitted to the approval
            of
            InBev's board of directors (including the appointment of AmBev board
            members)
            will be decided by a simple majority of the board. However, if during
            a board
            meeting it becomes apparent that the non-independent directors are deadlocked
            with respect to such matters, such non-independent directors will meet
            separately to try and reach a consensus. If consensus is not reached,
            then an
            alternating casting vote mechanism comes into play, and the Braco Group
            and the
            Interbrew Founding Families should flip a coin to determine which group
            of
            non-independent directors should cast the first casting vote.
  F-64
  As
            a
            result of the above, the Company believes that the former shareholders
            of both
            AmBev and Labatt have similar influence on the voting of the majority
            interest
            of InBev in AmBev. Therefore, notwithstanding the majority voting interest
            held
            by InBev, the rights conveyed by the InBev Shareholders’ Agreement to former
            AmBev shareholders would suggest that voting rights are a neutral indicator.
            However, we also considered certain approval rights under the AmBev
            Shareholders’ Agreement held by the FAHZ, an AmBev shareholder before the
            transaction. These rights are relevant in assessing the ability of former
            AmBev
            shareholders to influence the governance of AmBev after the transaction.
            The
            most important of these approval rights relate to the designation, dismissal
            and
            substitution of the Co-Chief Executive Officers, as well as approval
            of or
            amendment to the compensation policy for AmBev’s board of executive officers,
            including the Co-Chief Executive Officers. On the whole, the Company
            concluded
            that the rights conveyed by the AmBev Shareholders’ Agreement to the FAHZ point
            toward AmBev as the accounting acquirer.
  (ii)  InBev
            has
            the ability to appoint the majority of the members of our Board of Directors.
            However, through the Stichting and the InBev Shareholders’ Agreement, the Braco
            Group, former AmBev shareholders, share joint and equal influence with
            the
            Interbrew Founding Families, former Labatt shareholders, with respect
            to shares
            owned by InBev that comprise the majority voting interest in AmBev.
  In
            addition, FAHZ, an AmBev shareholder prior to the transaction, has the
            right to
            appoint up to four directors to our board. Accordingly, as of the latest
            general
            shareholders’ meeting held on April 12, 2005, InBev appointed eight directors to
            our board (six permanent members and two alternates) and FAHZ appointed
            three
            directors, in all cases for a three year term expiring in 2008. However,
            9 of
            the 11 board members had previous affiliations with AmBev or FAHZ prior
            to the
            AmBev-Labatt transaction (including Messrs. Lemann, Telles and Sicupira),
            and
            two were previously affiliated with Interbrew. In addition, on March
            7, 2006 one
            board member with previous affiliation with Interbrew resigned and was
            substituted by the Chief Executive Officer of InBev, who was the Chief
            Executive
            Officer of AmBev prior to the AmBev-Labatt transaction. Similar proportions
            existed on the board of directors immediately after the AmBev-Labatt
            transaction. This criterion indicates that AmBev is the accounting acquirer.
  (iii)  The
            third
            criterion indicates AmBev is the accounting acquirer because the senior
            management of AmBev subsequent to the transaction is substantially the
            same as
            that of AmBev prior to the transactions. As mentioned above, 10 of our
            11 board
            members have previous affiliations with AmBev or FAHZ prior to the AmBev-Labatt
            transaction. In addition, 9 of 11 members of our senior executive management
            were affiliated with AmBev prior to the AmBev-Labatt transactions.
  F-65
  (iv)  A
            premium
            was paid to the former shareholders of AmBev as measured by the fair
            value of
            the AmBev shares prior to the transaction compared to the consideration
            received.
  This
            criterion indicates that Labatt is the accounting acquirer.
  Based
            on
            consideration of each of the various factors, the Company concluded that
            the
            preponderance of the evidence indicates that AmBev was the accounting
            acquirer
            of Labatt.
  The
            purchase consideration of R$ 14,243.8 was determined based on the fair
            value of the shares issued by AmBev at March 3, 2005 which was considered
            to be
            the measurement date for this transaction.
  Goodwill
            arising from the acquisition of Labatt under US GAAP totaled
  R$ 12,950.5
            and will be tested for impairment on an annual basis or whenever events
            or
            circumstances indicates that a goodwill impairment test is
            necessary.
  The
            following fair value adjustments were made to the US GAAP book value
            of Labatt’s
            net assets:
  August 27,2004Book
                      value of our interest in Labatt
                  
                  
                  477.7Allocation
                      of fair value:Property,
                      plant and equipment
                  
                  
                  372.7Contractual
                      agreements
                  
                  
                  3,367.0Trademarks
                  
                  
                  1,887.1Contingencies
                      to be reimbursed by InBev
                  
                  
                  275.4Pension
                      and other post-retirement benefits
                  
                  
                  (382.7
                  )Reversal
                      of goodwill from previous acquisitions
                  
                  
                  (2,920.9
                  )Deferred
                      tax effect on fair value adjustments
                  
                  
                  (1,783.0
                  )Fair
                      value of investment in Labatt
                  
                  
                  1,293.3Total
                      purchase consideration
                  
                  
                  14,243.8Fair
                      value of subsidiary acquired
                  
                  
                  1,293.3Goodwill
                  
                  
                  12,950.5
   F-66
  Registered
              trademarks are not subject to amortization. Contractual agreements
              are subject
              to amortization over the contract term of 100 years.
 The
            following summary presents the Company’s unaudited pro forma consolidated
            results of operations for the years ended December 31, 2004 and 2003,
            in
            accordance with accounting principles generally accepted in the United
            States,
            as if the Labatt acquisition had been completed at the beginning of each
            period.
            The pro forma information is presented for comparative purposes only
            and does
            not purport to be indicative of what would have occurred had the acquisition
            actually been made at such date, nor is it necessarily indicative of
            future
            operating results:
  2004
                  
                  2003(Unaudited)
                  
                  (Unaudited)Net
                      sales
                  
                  
                  12,380.5
                  
                  
                  12,330.2Operating
                      income
                  
                  
                  3,605.4
                  
                  
                  3,021.9Net
                      income
                  
                  
                  1,761.8
                  
                  
                  2,308.0Net
                      earnings per thousand AmBev shares (R$):Basic:Common
                  
                  
                  35.37
                  
                  
                  53.91Preferred
                  
                  
                  38.90
                  
                  
                  59.30Diluted:Common
                  
                  
                  35.17
                  
                  
                  53.50Preferred
                  
                  
                  38.69
                  
                  
                  58.85
  ·
                  The
                      Quinsa transaction
  Under
            Brazilian GAAP, the acquisition of Quinsa generated goodwill of R$ 1,029.9,
            arising from the difference between total consideration paid and assets
            contributed (shares of Linthal S.A.), and the book value of net assets
            acquired,
            which was attributed to expected future profitability, to be amortized
            over ten
            years.
  Under
            US
            GAAP, we compared the total purchase consideration of R$ 1,950.2 ,
            comprised of: (i) cash paid totaling R$ 1,672.7; (ii) the fair value of our
            assets contributed to Quinsa of R$ 191.5 ; (iii) the fair value of the put
            option granted to BAC of R$ 69.0; and (iv) other costs associated to the
            acquisition totaling R$ 17.0 with the fair value of the net assets acquired
            of R$ 830.9 and the fair value of the call option received from BAC of
            R$ 68.1, resulting in goodwill of R$ 1,051.2. We reviewed our purchase
            accounting of Quinsa during 2004, and, as a result, our goodwill was
            increased
            by R$ 92.2. The measurement date of January 31, 2003 was used for purposes
            of determining the fair value of assets contributed.
  F-67
  The
            following fair value adjustments were made to the US GAAP book value
            of Quinsa’s
            net assets:
  January 31,2003Book
                      value of our interest in Quinsa
                  
                  
                  585.1Property,
                      plant and equipment
                  
                  
                  536.2Intangible
                      assets not previously recognized
                  
                  
                  153.6Reversal
                      of goodwill from previous acquisitions
                  
                  
                  (317.4
                  )Deferred
                      tax effect on fair value adjustments
                  
                  
                  (126.6
                  )Fair
                      value of investment in Quinsa
                  
                  
                  830.9
  The
              put
              option granted is recognized at fair value in our balance sheet as
              a non-current
              liability with changes in fair value, totaling R$ 209.2 in 2005
              (R$ 97.0 in 2004), recognized in income as Financial expenses under US
              GAAP. The call option is recorded at cost and was tested for impairment
              at
              December 31, 2005. No impairment charge was recognized.
 During
            2005, Quinsa acquired from BAC 5.32% equity interest in QIB, resulting
            in a
            goodwill under Brazilian GAAP, as mentioned in note 2 (ab). Under US
            GAAP, as
            BAC is one of the controlling shareholders of Quinsa, the difference
            between the
            purchase price paid and the US GAAP book value of BAC ́s investment in QIB was
            considered analogous to a dividend payment to BAC and thus reduced Quinsa’s
            equity under US GAAP.
  Consistent
            with Accounting Principles Board Opinion No. 18, *The
            Equity Method of Accounting for Investment in Common Stock* ,
            the
            carrying value of our investments in Quinsa was tested for impairment
            by
            comparing it to the December 31, 2005 market value of Quinsa’s ADRs. No
            impairment charge was recognized.
  ·
                  The
                      Antarctica transaction
  Under
            Brazilian GAAP, the transaction was treated as a merger (similar to a
            pooling-of-interest under US GAAP) whereby the controlling shareholders
            of
            Brahma and Antarctica each contributed their shares at the Brazilian
            GAAP book
            values of their corresponding net assets.
  Under
            Brazilian GAAP, the net assets of Antarctica were adjusted to be consistent
            with
            the accounting principles of Brahma, resulting in goodwill on the combination
            of
            R$ 815.6. This goodwill was attributed to property, plant and equipment
            (R$ 144.6) and future profitability (R$ 671.0) and will be amortized
            over the useful lives of the property, plant and equipment, and in the
            case of
            future profitability, over 10 years.
  Under
            US
            GAAP, the combination of Brahma and Antarctica was accounted for using
            the
            purchase method as defined by U.S. Accounting Principles Board Opinion
            (APB) No.
            16, Business Combinations, in which Brahma was the accounting
            acquirer.
  F-68
  The
            excess purchase price was allocated based on independent fair value appraisals
            to complement tangible assets (US$ 130.1 million) and the remainder to
            trademarks, distribution networks, software and others. The fair value
            allocated
            to tangible assets is being depreciated over an estimated average useful
            life of
            ten years, the fair value allocated to trademarks is being depreciated
            over 40
            years, the distribution network over 30 years and the software over five
            years.
  During
            2005, the Company merged the net assets of its subsidiary CBB at book
            value as
            mentioned in note 1 (b) (ii). As a result, the goodwill originally recorded
            at
            AmBev for Brazillian GAAP, attributed to property, plant and equipment
            fair
            value excess and expectation of future profitability was alocated to
            tangible
            and intangible assets, respectively. As a result, there was a reclassification
            of the amortization adjustment from goodwill to tangible and deferred
            charges.
  ·
                  Roll-up
                      of Brahma minorities
  At
            Brahma’s Extraordinary Shareholders’ meeting on September 14, 2000, Brahma’s
            common shareholders approved the combination by which all outstanding
            shares of
            Brahma not yet exchanged for AmBev shares were converted (rolled up)
            into shares
            of the same type and class of AmBev.
  The
            adjustment of R$ 149.9 to shareholders’ equity for all periods presented
            relates to the reversal of the negative goodwill under Brazilian
            GAAP.
  ·
                  Other
                      acquisitions
  Under
            Brazilian GAAP we acquired Embodom during 2004 with a goodwill of R$ 214.5,
            based on future profitability, to be amortized over ten years.
  As
            mentioned in note 1 (iv), during 2005 the goodwill balance was reduced
            by R$
            17.7 due to the recalculation of accumulated depreciation and by the
            amount of
            R$ 13.6 as a result of the sale by Embodom of the Red Rock soft
            drink.
  
  Under
            Brazilian GAAP we acquired Cervesursa in 2003 with a negative goodwill
            of
            R$ 18.5, based on expectations of future losses, to be amortized over ten
            years.
  Under
            US
            GAAP, we recorded a write-off of Cervesursa’s property and equipment in the
            amount of R$ 18.5.
  F-69
  A
            number
            of acquisitions in prior years were treated differently under Brazilian
            GAAP
            compared to US GAAP. These differences arose primarily from bases for
            determining purchase considerations, fair values, allocation of excess
            purchase
            prices, goodwill, amortization periods and cases of step-acquisition
            accounting.
  For
            US
            GAAP reconciliation purposes, additional credits of R$ 30.8 were recognized
            in income under US GAAP in the year ended December 31, 2005 (R$ 21.8 in
            2004 and R$ 24.5 in 2003).
  (vi)  FAHZ
            net
            assets
  FAHZ
            is a
            legally distinct entity for statutory purposes in Brazil. Under Brazilian
            GAAP,
            AmBev does not include the assets of FAHZ in its financial
            statements.
  For
            US
            GAAP purposes, the net assets of FAHZ, excluding the actuarial liability
            detailed below (see item vii), and its operating expenses, are included
            in the
            determination of shareholders’ equity and net income under US GAAP of AmBev
            because such assets are not considered to be plan assets as defined by
            SFAS
            No. 106, *Employers’
            Accounting for Post-retirement Benefits Other than Pensions* since
            they are not segregated and restricted between active and retired employees.
            The
            cash and cash equivalents of the FAHZ are presented as Restricted cash
            in the US
            GAAP condensed consolidated balance sheet. A substantial portion of the
            assets
            is represented by shares in AmBev and has been reflected as treasury
            shares,
            thereby reducing the number of outstanding shares and affecting the
            determination of earnings per share.
  The
            net
            assets and results of operations, after elimination adjustments of FAHZ
            as of
            and for the years ended December 31, 2005 and 2004 are as follows:
  2005
                  
                  2004
                  
                  2003Current
                      assets:Restricted
                      cash
                  
                  
                  239.8
                  
                  
                  271.4
                  
                  
                  279.5Other
                  
                  
                  8.0
                  
                  
                  13.1
                  
                  
                  11.5Property
                      and equipment
                  
                  
                  101.3
                  
                  
                  87.1
                  
                  
                  76.9Other
                      assets
                  
                  
                  2.3
                  
                  
                  2.3
                  
                  
                  3.8Current
                      liabilities
                  
                  
                  (3.1
                  )
                  
                  (8.2
                  )
                  
                  (4.3
                  )Non-current
                      liabilities
                  
                  
                  (55.4
                  )
                  
                  (32.1
                  )
                  
                  (24.5
                  )Net
                      assets
                  
                  
                  292.9
                  
                  
                  333.6
                  
                  
                  342.9Operating
                      expenses
                  
                  
                  (98.8
                  )
                  
                  (92.5
                  )
                  
                  (79.4
                  )Loss
                      from operations
                  
                  
                  (54.4
                  )
                  
                  (84.0
                  )
                  
                  (72.8
                  )Net
                      loss
                  
                  
                  (44.4
                  )
                  
                  (34.0
                  )
                  
                  (16.7
                  )
  F-70
  (vii)  Pension
            and other post-retirement benefits
  In
            determining the pension and other post-retirement benefit obligations
            for
            Brazilian GAAP purposes, NPC No. 26 became effective for financial statements
            ended December 31, 2001. As permitted by the Standard, the transitional
            gain or
            loss (being the difference between the plan net assets and the projected
            benefit
            obligation - PBO) at that date was fully recognized as a direct credit
            to
            retained earnings.
  Under
            US
            GAAP, SFAS No. 87, *Employer’s
            Accounting for Pensions, and SFAS* No. 106
            are effective for fiscal years beginning after 1988 and 1992, respectively.
            As
            from such dates, when an initial transition obligation determined based
            on an
            actuarial valuation was booked, actuarial gains and losses, as well as
            unexpected variations in plan assets and the PBO and the effects of amendments,
            settlements and other events, have been recognized in accordance with
            these
            standards and therefore result in deferral differences. Through 1997,
            these
            amounts were treated as non-monetary and were indexed for
            inflation.
  Under
            Brazilian GAAP, the Company does not record the liability related to
            medical,
            dental, educational and social assistance provided by FAHZ, as they are
            considered legally separate entities and under current welfare foundation
            regulation, the surplus of assets over liabilities of FAHZ at December
            31, 2005
            cannot be returned to the Company. Under US GAAP those liabilities are
            recorded
            as post-retirement benefits. FAHZ provides such benefits to current and
            retired
            employees of AmBev in Brazil and their beneficiaries and covered dependents
            (approximately 47,800 beneficiaries and dependents at December 31, 2005
            and
            45,000 in 2004).
  Plan
            assets include amounts contributed by AmBev and its employees and amounts
            earned
            from investing the contributions, less benefits paid. Based on the actuarial
            review of the defined benefit plan which had been closed to new participants,
            net assets at December 31, 2005 were considered to be in excess of that
            required to meet the projected benefit obligation. Although AmBev will
            reduce
            future employer contributions to the minimum permitted by law, Brazilian
            pension
            regulations currently provide no means for returning this surplus to
            the
            sponsor. In view of this uncertainty, AmBev included in the actuarial
            determination of the pension obligation at December 31, 2005 a valuation
            allowance of R$ 240.2 against the plan assets (R$ 195.2 in 2004). This
            allowance impacts the determination of the pension charge/benefit.
  Under
            US
            GAAP, as confirmed by a meeting of the AICPA International Practices
            Task Force
            on November 25, 2002, recording a valuation allowance against a pension
            asset is
            not appropriate. Accordingly, the valuation allowance was reversed and
            included
            in the actuarial gain or loss calculation for purposes of reconciliation
            to US
            GAAP.
  Based
            on
            the report of our independent actuary, the funded status and amounts
            recorded in
            our US GAAP condensed balance sheets and statements of operations as
            of and for
            the years ended December 31, 2005 and 2004 for our pension and welfare
            obligations to retirees in accordance with SFAS No. 132, *Employer’s
            Disclosures about Pensions and other Post-retirement Benefits* ,
            are as
            follows:
  F-71
  Benefits
                      otherPension
                      benefits
                  
                  than
                      pension2005
                  
                  2004
                  
                  2005
                  
                  2004Change
                      in benefit obligation:Projected
                      benefit obligation:At
                      beginning of year
                  
                  
                  2,602.0
                  
                  
                  360.7
                  
                  
                  632.8
                  
                  
                  338.5Acquisition
                      of Labatt
                  
                  
                  -
                  
                  
                  2,042.0
                  
                  
                  -
                  
                  
                  223.2Plan
                      participant’s contribution
                  
                  
                  4.8
                  
                  
                  1.5
                  
                  
                  -
                  
                  
                  -Service
                      cost
                  
                  
                  30.9
                  
                  
                  14.3
                  
                  
                  4.7
                  
                  
                  1.6Interest
                      cost
                  
                  
                  162.4
                  
                  
                  86.4
                  
                  
                  61.4
                  
                  
                  46.7Net
                      increase in notional account balance
                  
                  
                  0.1
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Prior
                      service cost
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Actuarial
                      loss
                  
                  
                  214.1
                  
                  
                  149.7
                  
                  
                  90.5
                  
                  
                  57.2Translation
                      loss
                  
                  
                  (196.6
                  )
                  
                  (32.4
                  )
                  
                  (21.3
                  )
                  
                  (3.5
                  )Gross
                      benefits paid
                  
                  
                  (157.0
                  )
                  
                  (68.5
                  )
                  
                  (42.4
                  )
                  
                  (30.9
                  )Special
                      termination benefits
                  
                  
                  34.8
                  
                  
                  42.0
                  
                  
                  -
                  
                  
                  -Curtailments
                  
                  
                  (7.9
                  )
                  
                  2.9
                  
                  
                  0.7
                  
                  
                  -Amendments
                  
                  
                  15.1
                  
                  
                  3.4
                  
                  
                  -
                  
                  
                  -Projected
                      benefit obligation at end of year
                  
                  
                  2,702.7
                  
                  
                  2,602.0
                  
                  
                  726.4
                  
                  
                  632.8Accumulated
                      benefit obligation
                  
                  
                  2,632.8
                  
                  
                  2,530.9Change
                      in plan assetsFair
                      value of plan assetsAt
                      beginning of year
                  
                  
                  2,230.9
                  
                  
                  501.6
                  
                  
                  -
                  
                  
                  -Acquisition
                      of Labatt
                  
                  
                  -
                  
                  
                  1,513.4
                  
                  
                  -
                  
                  
                  -Actual
                      return on plan assets
                  
                  
                  243.9
                  
                  
                  282.7
                  
                  
                  -
                  
                  
                  -Employer
                      contributions
                  
                  
                  137.5
                  
                  
                  69.6
                  
                  
                  10.6
                  
                  
                  4.0Employee
                      contributions
                  
                  
                  5.6
                  
                  
                  6.1Actuarial
                      loss (gain)
                  
                  
                  37.6
                  
                  
                  27.5
                  
                  
                  -
                  
                  
                  -Translation
                      loss
                  
                  
                  (142.1
                  )
                  
                  (24.0
                  )
                  
                  -
                  
                  
                  -Gross
                      benefits paid
                  
                  
                  (157.0
                  )
                  
                  (146.0
                  )
                  
                  (10.6
                  )
                  
                  (4.0
                  )Fair
                      value of plan assets at end of year
                  
                  
                  2,356.4
                  
                  
                  2,230.9
                  
                  
                  -
                  
                  
                  -Funded
                      status at end of year
                  
                  
                  (346.3
                  )
                  
                  (371.1
                  )
                  
                  (726.4
                  )
                  
                  (632.8
                  )Unrecognized
                      netactuarial
                      (gain) loss
                  
                  
                  54.4
                  
                  
                  (83.7
                  )
                  
                  303.6
                  
                  
                  223.6Unrecognized
                      prior service cost
                  
                  
                  37.0
                  
                  
                  28.5
                  
                  
                  -
                  
                  
                  -Unrecognized
                      net transition obligation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  11.5
                  
                  
                  13.1Net
                      amount recognized at end of year
                  
                  
                  (254.9
                  )
                  
                  (426.3
                  )
                  
                  (411.3
                  )
                  
                  (396.1
                  )Short-term
                  
                  
                  (221.3
                  )
                  
                  -
                  
                  
                  (12.4
                  )
                  
                  -Long-term
                  
                  
                  (241.1
                  )
                  
                  (442.5
                  )
                  
                  (398.9
                  )
                  
                  (396.1
                  )Intangible
                      assets
                  
                  
                  13.7
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Other
                      comprehensive income
                  
                  
                  193.8
                  
                  
                  16.2
                  
                  
                  -
                  
                  
                  -Net
                      amount recognized at end of year
                  
                  
                  (254.9
                  )
                  
                  (426.3
                  )
                  
                  (411.3
                  )
                  
                  (396.1
                  )
  F-72
  The
            charge in the statement of operations is comprised as follows:
   Pension
                      benefits
                  
                  Benefits other than pension2005
                  
                  2004
                  
                  2003
                  
                  2005
                  
                  2004
                  
                  2003Components
                      of net periodic benefit costService
                      cost
                  
                  
                  30.9
                  
                  
                  14.3
                  
                  
                  3.1
                  
                  
                  4.8
                  
                  
                  1.6
                  
                  
                  -Interest
                      cost
                  
                  
                  162.4
                  
                  
                  86.4
                  
                  
                  45.0
                  
                  
                  61.4
                  
                  
                  46.7
                  
                  
                  33.5Expected
                      return on assets
                  
                  
                  (212.8
                  )
                  
                  (113.0
                  )
                  
                  (80.1
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Amortization
                      of:Transition
                      obligation (asset)
                  
                  
                  
                  
                  
                  0.2
                  
                  
                  0.6
                  
                  
                  1.5
                  
                  
                  1.5
                  
                  
                  1.5Prior
                      service cost
                  
                  
                  6.6
                  
                  
                  4.9
                  
                  
                  4.9
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Actuarial
                      (gain) loss
                  
                  
                  (8.1
                  )
                  
                  (2.5
                  )
                  
                  (5.6
                  )
                  
                  9.0
                  
                  
                  7.5
                  
                  
                  4.1Employee
                      contributions
                  
                  
                  (0.7
                  )
                  
                  (0.8
                  )
                  
                  (0.9
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Termination
                      benefits
                  
                  
                  34.8
                  
                  
                  42.0
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Settlement
                  
                  
                  0.8
                  
                  
                  -
                  
                  
                  -
                  
                  
                  0.7
                  
                  
                  -
                  
                  
                  -Curtailment
                      cost
                  
                  
                  -
                  
                  
                  2.9
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Total
                      net periodic benefit cost (benefit)
                  
                  
                  13.9
                  
                  
                  34.4
                  
                  
                  (33.0
                  )
                  
                  77.4
                  
                  
                  57.3
                  
                  
                  39.1
  Assumed
            health care cost trend rates have a significant effect on the amounts
            reported
            for the welfare plans. A one-percentage-point change in assumed health
            care cost
            trend rates would have the following effects (all other assumptions have
            been
            held constant):
  AmBev
                      and Labatt’s Plans
                  
                  One-percentage-point
                      increase
                  
                  One-percentage-point
                      decrease2005
                  
                  2004
                  
                  2003
                  
                  2005
                  
                  2004
                  
                  2003Sensitivity
                      of retiree welfare resultsOn
                      total service and interest cost components
                  
                  
                  5.1/3.6
                  
                  
                  5.2/1.3
                  
                  
                  4.5
                  
                  
                  (4.4)/(3.0
                  )
                  
                  (4.4)/(1.0
                  )
                  
                  (3.8
                  )On
                      post-retirement benefit obligation
                  
                  
                  43.2/47.9
                  
                  
                  40.0/12.8
                  
                  
                  35.1
                  
                  
                  (36.9)/(41.4
                  )
                  
                  (34.1)/(11.3
                  )
                  
                  (29.7
                  )
  Under
            US
            GAAP, we recognized an additional liability related to other post-retirement
            benefits totaling R$ 117.4 in 2005, R$ 95.8 in 2004 and R$ 77.1
            in 2003.
  Under
            US
            GAAP we recognized an additional pension plan asset of R$ 140.0 in 2005,
            R$ 91.8 in 2004 and R$ 66.3 in 2003, respectively.
  AmBev’s
            pension plan weighted-average assets allocation at December 31, 2005
            and 2004,
            by asset category, is as follows:
  Labatt
                  
                  AmBevQuebec
                      Plan
                  
                  National
                      and salaried Plans
                  
                  Quebec
                      Plan
                  
                  National
                      and salaried Plans2005
                  
                  2005
                  
                  2004
                  
                  2004
                  
                  2005
                  
                  2004Fixed
                      Income
                  
                  
                  40
                  %
                  
                  35
                  %
                  
                  41
                  %
                  
                  36
                  %
                  
                  78
                  %
                  
                  62
                  %Real
                      estate
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5
                  %
                  
                  5
                  %Equity
                      securities
                  
                  
                  60
                  %
                  
                  65
                  %
                  
                  59
                  %
                  
                  64
                  %
                  
                  17
                  %
                  
                  33
                  %Total
                  
                  
                  100
                  %
                  
                  100
                  %
                  
                  100
                  %
                  
                  100
                  %
                  
                  100
                  %
                  
                  100
                  %
  F-73
  The
            Company’s investment strategy for its pension plan is to maximize the long-term
            rate of return on plan assets within an acceptable level of risk in order
            to
            minimize the cost of providing pension benefits while maintaining adequate
            funding levels. The Company’s practice is to conduct a review of its assets
            allocation strategy every year.
  Included
            within the fair value of the IAPP plan assets as of December 31, 2005
            are 9.595
            thousand of our preferred shares and 1.919 thousand of our common shares
            with a
            total fair value at December 31, 2005 of R$ 10.1 (R$ 128.4 in
            2004).
  Assumptions
            applied were as follows:
  (i)  Weighted
            average assumptions to determine benefit obligations for years ended
            December
            31, 2005 and 2004:
  Labatt
                  
                  AmBevPension
                       benefits
                  
                  Benefits
                      other than pension
                  
                  Pension benefits
                  
                  Benefits
                      other than pension2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004Discount
                      rate
                  
                  
                  5.0
                  %
                  
                  5.7
                  %
                  
                  5.0
                  %
                  
                  5.7
                  %
                  
                  10.8
                  %
                  
                  10.9
                  %
                  
                  10.8
                  %
                  
                  10.9
                  %Projected
                      annual inflation rate
                  
                  
                  2.0
                  %
                  
                  2.0
                  %
                  
                  2.0
                  %
                  
                  2.0
                  %
                  
                  4.1
                  %
                  
                  4.1
                  %
                  
                  4.1
                  %
                  
                  4.1
                  %Rate
                      of compensation increase
                  
                  
                  3.0
                  %
                  
                  3.0
                  %
                  
                  -
                  
                  
                  -
                  
                  
                  7.2
                  %
                  
                  7.3
                  %
                  
                  -
                  
                  
                  -Health
                      care cost trend on covered charges
                  
                  
                  -
                  
                  
                  -
                  
                  
                  9.5
                  %
                  
                  10.0
                  %
                  
                  -
                  
                  
                  -
                  
                  
                  7.1
                  %
                  
                  7.3
                  %
  (ii)  Weighted
            average assumptions to determine net periodic benefit cost for years
            ended
            December 31, 2005 and 2004:
  Labatt
                  
                  AmBevPension
                       benefits
                  
                  Benefits
                      other than pension
                  
                  Pension benefits
                  
                  Benefits
                      other than pension2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2005
                  
                  2004Discount
                      rate
                  
                  
                  5.7
                  %
                  
                  6.2
                  %
                  
                  5.7
                  %
                  
                  6.2
                  %
                  
                  10.8
                  %
                  
                  10.9
                  %
                  
                  10.8
                  %
                  
                  10.9
                  %Projected
                      annual inflation rate
                  
                  
                  2.0
                  %
                  
                  2.0
                  %
                  
                  2.0
                  %
                  
                  2.0
                  %
                  
                  4.1
                  %
                  
                  4.1
                  %
                  
                  4.1
                  %
                  
                  4.1
                  %Expected
                      return long-term rate of return on plan assets (i)
                  
                  
                  8.0
                  %
                  
                  8.0
                  %
                  
                  -
                  
                  
                  -
                  
                  
                  14.9
                  %
                  
                  15.0
                  %
                  
                  -
                  
                  
                  -Rate
                      of compensation increase
                  
                  
                  3.0
                  %
                  
                  3.0
                  %
                  
                  -
                  
                  
                  -
                  
                  
                  7.2
                  %
                  
                  7.3
                  %
                  
                  -
                  
                  
                  -Health
                      care cost trend on covered charges
                  
                  
                  -
                  
                  
                  -
                  
                  
                  9.5
                  %
                  
                  10.0
                  %
                  
                  7.2
                  %
                  
                  -
                  
                  
                  7.2
                  %
                  
                  7.3
                  %
  (i)
            The
            overall expected long-term rate of return on assets was calculatde based
            on the
            contractual rates (fixed income and real state) or historical return
            for equity
            securities.
  F-74
  Expected
            cash flows:
  Information
            about the expected benefit payments for the Company’s defined benefit plan and
            other post-retirement benefits is as follows:
  AmBev’s
                      PlansBenefitsLabatt’s
                  
                  Pension
                  
                  other thanplans
                  
                  Benefits
                  
                  pension
                  
                  Total2006
                  
                  
                  115.3
                  
                  
                  33.1
                  
                  
                  35.3
                  
                  
                  183.72007
                  
                  
                  120.1
                  
                  
                  32.9
                  
                  
                  37.4
                  
                  
                  190.42008
                  
                  
                  124.9
                  
                  
                  31.6
                  
                  
                  39.2
                  
                  
                  195.72009
                  
                  
                  130.3
                  
                  
                  32.4
                  
                  
                  40.9
                  
                  
                  203.62010
                  
                  
                  135.8
                  
                  
                  32.1
                  
                  
                  42.6
                  
                  
                  210.52011-2015
                  
                  
                  751.1
                  
                  
                  153.2
                  
                  
                  234.6
                  
                  
                  1,138.91,377.5
                  
                  
                  315.3
                  
                  
                  430.0
                  
                  
                  2,122.8
  The
            Company’s contributions expected to be paid during the year end December 31,
            2006 is R$ 307.0.
  (iii)  Earnings
            per share
  Under
            Brazilian GAAP, earnings per share are calculated on the number of shares
            outstanding at the balance sheet date; no information is disclosed on
            diluted
            earnings per share. Information is disclosed per lot of one thousand
            shares,
            because generally this is the minimum number of shares that can be traded
            on the
            Brazilian stock exchanges.
  Under
            US
            GAAP, because the preferred and common shareholders have different voting
            and
            liquidation rights, Basic and Diluted earnings per share have been calculated
            using the “two-class” method, pursuant to SFAS No. 128, *Earnings
            per Share which provides computation* ,
            presentation and disclosure requirements for earnings per share. The
“two-class”
method is an earnings allocation formula that determines earnings per
            share for
            preferred and common stock according to the dividends to be paid as required
            by
            the Company’s bylaws and participation rights in undistributed earnings. Basic
            earnings per common share are computed by dividing net income by the
            weighted
            average number of common and preferred shares outstanding during the
            period.
  The
            table
            below presents the determination of net income available to common and
            preferred
            shareholders and weighted average common and preferred shares outstanding
            used
            to calculate basic and diluted earnings per share for each of the years
            presented.
  F-75
  The
            inclusion of the net assets of FAHZ has had the effect of reducing the
            number of
            outstanding shares.
  For
            purposes of computing diluted earnings per share, stock granted in the
            stock
            ownership plan and stock warrants are assumed to be converted into preferred
            or
            common shares as of the date of issuance of the security using the treasury
            stock method.
  Earnings
            per share for the periods ended December 31, 2004 and 2003 have been
            calculated
            giving retroactive effect for the share dividend distribution of 1 common
            share
            for each 5 common or preferred shares held which was paid on May 31,
            2005.
  F-76
  Under
              US
              GAAP
 2005
                  
                  2004
                  
                  2003Preferred
                  
                  Common
                  
                  Total
                  
                  Preferred
                  
                  Common
                  
                  Total
                  
                  Preferred
                  
                  Common
                  
                  Total(Restated)
                  
                  (Restated)
                  
                  
                  
                  (Restated)
                  
                  (Restated)Basic
                      numerator:Actual
                      dividends declared
                  
                  
                  1,296.5
                  
                  
                  986.2
                  
                  
                  2,282.7
                  
                  
                  307.9
                  
                  
                  250.4
                  
                  
                  558.3
                  
                  
                  535.2
                  
                  
                  413.6
                  
                  
                  948.8Basic
                      allocated undistributed earnings
                  
                  
                  243.3
                  
                  
                  185.0
                  
                  
                  428.3
                  
                  
                  504.2
                  
                  
                  410.2
                  
                  
                  914.4
                  
                  
                  417.7
                  
                  
                  322.9
                  
                  
                  740.6Allocated
                      net income available for common and preferred shareholders
                  
                  
                  1,539.8
                  
                  
                  1,171.2
                  
                  
                  2,711.0
                  
                  
                  812.1
                  
                  
                  660.6
                  
                  
                  1,472.7
                  
                  
                  952.9
                  
                  
                  736.5
                  
                  
                  1,689.4Basic
                      denominator (in thousand of shares):Weighted
                      average shares - AmBev
                  
                  
                  30,970,863
                  
                  
                  29,909,181
                  
                  
                  60,880,045
                  
                  
                  25,375,493
                  
                  
                  26,139,315
                  
                  
                  51,514,808
                  
                  
                  22,371,249
                  
                  
                  22,421,904
                  
                  
                  44,793,153Weighted
                      average shares held by FAHZ
                  
                  
                  (395,898
                  )
                  
                  (4,324,925
                  )
                  
                  (4,720,823
                  )
                  
                  (405,072
                  )
                  
                  (3,794,205
                  )
                  
                  (4,199,277
                  )
                  
                  (419,053
                  )
                  
                  (3,757,548
                  )
                  
                  (4,176,601
                  )Weighted
                      average outstanding shares, net
                  
                  
                  30,574,965
                  
                  
                  25,584,256
                  
                  
                  56,159,222
                  
                  
                  24,970,421
                  
                  
                  22,345,110
                  
                  
                  47,315,531
                  
                  
                  21,952,196
                  
                  
                  18,664,356
                  
                  
                  40,616,552Basic
                      earnings per thousand shares - US GAAP (*) (whole *reais*) -
                      R$
                  
                  
                  50.36
                  
                  
                  45.78
                  
                  
                  
                  
                  
                  32.52
                  
                  
                  29.56
                  
                  
                  
                  
                  
                  43.41
                  
                  
                  39.46Diluted
                      numerator:Actual
                      dividends declared
                  
                  
                  1,298.7
                  
                  
                  984.0
                  
                  
                  2,282.7
                  
                  
                  308.8
                  
                  
                  249.5
                  
                  
                  558.3
                  
                  
                  537.2
                  
                  
                  411.6
                  
                  
                  948.8Diluted
                      allocated undistributed earnings
                  
                  
                  243.7
                  
                  
                  184.6
                  
                  
                  428.3
                  
                  
                  505.7
                  
                  
                  408.7
                  
                  
                  914.4
                  
                  
                  419.3
                  
                  
                  321.3
                  
                  
                  740.6Allocated
                      net income available for common and preferred shareholders
                  
                  
                  1,542.4
                  
                  
                  1,168.6
                  
                  
                  2,711.0
                  
                  
                  814.5
                  
                  
                  658.2
                  
                  
                  1,472.7
                  
                  
                  956.5
                  
                  
                  732.9
                  
                  
                  1,689.4Diluted
                      denominator:Stock
                      ownership plan
                  
                  
                  124,370
                  
                  
                  -
                  
                  
                  124,370
                  
                  
                  216,156
                  
                  
                  -
                  
                  
                  216,156
                  
                  
                  250,579
                  
                  
                  
                  
                  
                  250,579Diluted
                      weighted average shares (in thousands)
                  
                  
                  30,699,336
                  
                  
                  25,584,256
                  
                  
                  56,283,592
                  
                  
                  25,186,577
                  
                  
                  22,388,341
                  
                  
                  47,574,918
                  
                  
                  22,202,775
                  
                  
                  18,714,472
                  
                  
                  40.917,247Diluted
                      earnings per thousand shares - US GAAP (*) (whole *reais*) -
                      R$
                  
                  
                  50.24
                  
                  
                  45.68
                  
                  
                  
                  
                  
                  32.34
                  
                  
                  29.40
                  
                  
                  
                  
                  
                  43.08
                  
                  
                  39.16
  (*) Preferred
            shareholders are entitled to receive per share dividends of at least
            10% greater
            than the per share dividends paid to common shareholders. Undistributed
            earnings, therefore, have been allocated to common and preferred shareholders
            on
            a 100 to 110 basis, respectively, based upon the weighted average number
            of
            shares outstanding during the period to total shares (allocation percentage).
            Common and preferred shareholders share equally in undistributed
            losses.
  F-77
  (ix)  Foreign
            exchange gain (loss) from translation of foreign subsidiaries
  Under
            Brazilian GAAP, gains or losses arising from the translation of our foreign
            subsidiaries for purposes of consolidation are recorded in income.
  Under
            US
            GAAP, we record these gains or losses directly in our shareholders’ equity as
            cumulative translation adjustments, a component of other comprehensive
            income.
  (x)  Income
            taxes
  Under
            Brazilian GAAP, the deferred income tax asset represents the probable
            estimated
            amount to be recovered. In addition, deferred income taxes are presented
            gross
            rather than being netted.
  Under
            US
            GAAP, deferred income taxes are recognized on all temporary tax differences.
            Valuation allowances are established when it is not more likely than
            not that
            tax losses will be recovered. Deferred tax assets and liabilities are
            classified
            as current or long-term based on the classification of the asset or liability
            underlying the temporary difference. Deferred income tax assets and liabilities
            are netted rather than presented gross.
  As
            discussed in Note 18 (i)(b), as part of the 1997 Pepsi transaction we
            acquired
            the conditional right to certain tax related assets. As we had not utilized
            the
            assets within the period which expired on October 21, 2002, any future
            benefit
            from these assets accrues entirely to AmBev.
  We
            recorded these tax credits during 2003 for purposes of Brazilian GAAP,
            under the
            most stringent probability tests and CVM regulations. Under US GAAP,
            we recorded
            this tax benefit in 2002 as recovery was then considered to be more likely
            than
            not.
  (xi)  Provision
            for dividends and interest attributable to own capital
  Under
            Brazilian GAAP, at each year-end, management is required to propose a
            dividend
            distribution from earnings and accrue for it in the financial statements.
            Under
            Brazilian GAAP, companies are permitted to distribute or capitalize an
            amount of
            interest, subject to certain limitations, calculated based on a government
            interest rate, on shareholders’ equity. Such amounts are tax-deductible and are
            presented as a deduction from shareholders’ equity.
  Under
            US
            GAAP, since proposed dividends may be ratified or modified at the annual
            Shareholders’ Meeting, such dividends should not be considered as declared at
            the balance sheet date and therefore should not be accrued. However,
            interim
            dividends paid or interest credited to shareholders as interest attributable
            to
            shareholders’ equity under Brazilian legislation should be considered as
            declared for US GAAP purposes.
  At
            December 31, 2005 the provision of R$ 9.8 (R$ 992.9 in 2004 and
            R$ 280.2 in 2003) for proposed dividends was reversed under US
            GAAP.
  F-78
  (xii)  Stock
            ownership plan
  Under
            Brazilian GAAP, the rights to acquire AmBev’s shares granted to employees,
            officers and directors under the stock ownership plan do not result in
            any
            expense being recorded. The purchase of the stock by the employees is
            recorded
            as an increase in capital stock in the amount of the purchase
            price.
  Under
            US
            GAAP, in accordance with APB 25, *Accounting
            for Stock Issued to Employees* ,
            the
            rights to acquire AmBev’s shares granted under the stock ownership plan are
            deemed to give rise to compensation expense to the extent of the excess
            market
            price of the shares over the purchase price to employees, officers and
            directors. Unearned compensation expense is calculated at the end of
            each year
            using the expected number of awards outstanding. These awards are multiplied
            by
            the year-end market price less the employees’ expected share price. The
            incremental change in compensation cost is then amortized as a charge
            to expense
            over the periods in which the employees perform the related services;
            such
            periods normally include a vesting period.
  In
            addition, under US GAAP pro forma disclosures of net income and earnings
            per
            share are presented under the fair value method of accounting. Under
            this
            method, fair value is determined using a pricing model (Black - Scholes),
            which
            takes into account the stock price at the grant date, the purchase price,
            the
            expected life of the award, the volatility of the underlying stock, the
            expected
            dividends, and the risk-free interest rate over the expected life of
            the
            award.
  For
            reconciliation purposes, additional charges were recognized under US
            GAAP in the
            amounts of R$ 85.6 in 2005, R$ 14.3 in 2004 and R$ 32.0 in 2003.
  (xiii)  Advances
            to employees for purchase of shares
  Under
            Brazilian GAAP, advances to employees for purchase of shares are recorded
            as an
            asset and interest accrued is credited to income.
  Under
            US
            GAAP, as the advances are collateralized by the stock issued under the
            stock
            ownership plan, the loan is reported as a deduction from shareholders’
equity.
  For
            reconciliation purposes, shareholders’ equity is reduced under US GAAP by
            R$ 114.9 in 2005, R$ 175.2 in 2004 and R$ 234.7 in
            2003.
  (xiv)  Accounting
            for derivative instruments
  Under
            Brazilian GAAP, derivative instruments are recorded at the lower of cost
            plus
            accrued interest and fair market value. Additionally, unrealized gains
            or losses
            arising from transactions, which are designated as hedge instruments,
            entered to
            mitigate risks on purchase of raw materials, are deferred and recognized
            in the
            statement of operations when realized.
  F-79
  Under
            US
            GAAP, SFAS No. 133, *Accounting
            for Derivative Instruments and Hedging Activities* establishes accounting and reporting standards for derivative instruments
            and
            for hedging activities. It requires that an entity recognize all derivatives
            as
            either assets or liabilities and measure those instruments at fair
            value.
  For
            purposes of the reconciliation, we have recorded unrealized gain totaling
            R$ 11.0 in income under US GAAP, arising from the mark-to-market adjustment
            on our derivative instruments at December 31, 2005 (Unrealized (losses)
            gains of
            R$ (199.0) in 2004 and R$ 153.8 in 2003).
  (xv)
            Short-term investments
  Under
            Brazilian GAAP, short-term investments are recorded at the balance sheet
            dates
            at the lower of cost plus interest and market value.
  For
            US
            GAAP purposes, our short-term investments in debt securities are classified
            under guidance of SFAS No.115 *Accounting
            for Certain Investments in Debt and Equity Securities* as
            either trading securities or available for sale securities.
  Our
            securities classified as Trading are measured at fair value at the balance
            sheet
            dates, and unrealized gains (losses) are included in income. During 2005,
            we
            recorded the amount of R$ 2.6.
  Our
            securities classified as Available for Sale are measured at fair value
            at the
            balance sheet dates, interest is recorded in income as incurred and unrealized
            gains (losses) are included directly in shareholders’ equity as Other
            comprehensive income (loss). At December 31, 2005, the amount of R$ 0.5 was
            recorded in Other comprehensive income as Unrealized gain from
            available-for-sale debt securities (R$ 17.7 in 2004).
  (xvi)
            Classification of statement of operations line items
  Under
            Brazilian GAAP, in addition to the issues noted above, the classification
            of
            certain income and expense items is presented differently from US GAAP.
  We
            have
            recast our statement of operations under the Brazilian GAAP to present
            a
            condensed statement of operations in accordance with US GAAP (Note 23(d)(ii)).
  We
            have
            also incorporated the net income (loss) differences between Brazilian
            GAAP and
            US GAAP (Note 23 (b)(i)) in the statement of operations in accordance
            with US
            GAAP. The reclassifications are summarized as follows:
  ·
                  Interest
                        income and interest expense, together with other financial
                        charges, are
                        displayed within operating income in the statement of operations
                        presented
                        in accordance with Brazilian GAAP. Such amounts have been
                        reclassified to
                        non-operating income and expenses in the condensed statement
                        of operations
                        in accordance with US GAAP.
  F-80
  ·
                  Under
                      Brazilian GAAP, gains and losses on the disposal or impairment
                      of
                      permanent assets are classified as non-operating income (expense).
                      Under
                      US GAAP, gains and losses on the disposal or impairment of
                      property, plant
                      and equipment are classified as an adjustment to operating
                      income.
  ·
                  Employee
                      profit sharing expenses have been classified after non-operating
                      expenses
                      in the consolidated statement of operations in accordance with
                      Brazilian
                      GAAP. Such amounts have been reclassified to operating expenses
                      in the
                      condensed consolidated statement of operations in accordance
                      with US GAAP.
  ·
                  Under
                      Brazilian GAAP, certain credits arising from sales tax are
                      recorded in
                      operating income. Under US GAAP these credits are adjusted
                      against net
                      sales, as sales tax deduction.
  ·
                  Under
                      Brazilian GAAP, charges arising from provision for contingencies
                      are
                      presented in a single line item in operating expense. Under
                      US GAAP,
                      provisions for contingencies are recorded in the statement
                      of operations
                      based on the type of contingency.
  ·
                  Under
                      Brazilian GAAP, jointly controlled entities must be consolidated
                      using the
                      proportionate consolidation method. Proportionate consolidation
                      requires
                      that the share of the assets, liabilities, income and expenses
                      to be
                      combined on a line-by-line basis with similar items in the
                      Company’s
                      financial statements. Under US GAAP, jointly controlled entities
                      are
                      recorded under the equity method. The prorated accounts of
                      our jointly
                      controlled affiliates have not been combined in the US GAAP
                      condensed
                      consolidated balance sheet and statements of operations.
  ·
                    Under
                        Brazilian GAAP, shipping and handling costs, representingR$ 499.9,
                        R$ 409.2 and R$ 324.1, for the years ended December 31, 2005,
                        2004, and 2003, respectively, are expensed as incurred and
                        classified as
                        selling expenses in the statement of operations. Under US
                        GAAP, pursuant
                        to the requirements of Emerging Issues Task Force - EITF
                        Issue
                        No. 00-10, these expenses were reclassified to cost of sales.
  ·
                  In
                      order to obtain more prominent and accessible shelf space for
                      its
                      products, AmBev pays distributors and retailers to place our
                      products in
                      premium positions. The Company also pays bonuses and gives
                      discounts to
                      increase sales, normally processed in the form of cash payments.
                      Under
                      Brazilian GAAP, these costs are classified as selling and marketing
                      expenses. Under US GAAP, pursuant to EITF 01-09 these costs
                      are
                      reclassified reducing net revenues.
  F-81
  ·
                  Under
                      Brazilian GAAP, unrealized gains or losses arising from foreign
                      currency
                      and commodities swaps entered to mitigate price and foreign
                      exchange risks
                      on purchase of raw material, designated as hedge instruments
                      are deferred
                      and recognized in the statement of operations as Cost of sales
                      upon
                      realization. For US GAAP, as these instruments do not meet
                      the qualifying
                      criteria for hedge accounting under SFAS No. 133 for the years
                      ended
                      December 31, 2004 and 2003, gains or losses, due to changes
                      in fair value
                      of swaps, were recorded as Financial income or Financial expense.
                      The
                      total amount reclassified were R$ 14.0 and R$ 82.3, for the years
                      ended December 31, 2004 and 2003, respectively.
  (xvii)  Classification
            of balance sheet items
  Under
            Brazilian GAAP, the classification of certain balance sheet items is
            presented
            differently from US GAAP. We have eliminated the effects of the proportionate
            consolidation of our investment in Quinsa and certain other affiliates
            and
            reflected our investment in these affiliates on a single line item (Investment
            in affiliates) in the recast balance sheet under US GAAP.
  We
            have
            recast our consolidated balance sheet under Brazilian GAAP to present
            a
            condensed consolidated balance sheet in accordance with US GAAP (Note
            23
            (d)(i)). The reclassifications are summarized as follows:
  ·
                  Under
                      US GAAP certain deferred charges were reclassified to property,
                      plant and
                      equipment, according to their nature.
  ·
                  Under
                      US GAAP certain property, plant and equipment were reclassified
                      to
                      intangible assets, according to their nature.
  ·
                  Under
                      Brazilian GAAP, deferred income taxes are not netted and assets
                      are shown
                      separately from liabilities. For US GAAP purposes, deferred
                      tax assets and
                      liabilities are netted and classified as current or long-term
                      based on the
                      classification of the underlying temporary difference.
  ·
                  Under
                      Brazilian GAAP, the remaining amount of goodwill, originally
                      recorded by
                      InBev Brasil as mentioned in note 1 (I), correspondent to the
                      future tax
                      benefit in accordance with the applicable tax legislation in
                      Brazil, was
                      recorded as deferred charges. Under US GAAP the total tax benefit
                      at
                      December 31, 2005 amounting to R$ 2,684.5 was reclassified
                      to deferred tax
                      asset.
  F-82
  b)  Reconciliation
            of the differences between Brazilian GAAP and US GAAP
  (i)  Net
            income
  **Ref. Note****23(a)**
                  
                  **2005**
                  
                  **2004**
                  
                  **2003****(Restated)**
                  
                  **(Restated)****Net
                      income under Brazilian GAAP**
                  
                  
                  
                  
                  
                  **1,545.7**
                  
                  
                  **1,161.5**
                  
                  
                  **1,411.6****Depreciation
                      of additional indexation of property and equipment from 1995
                      to
                      1997**
                  
                  
                  **(i**
                  **)**
                  
                  **(16.9**
                  **)**
                  
                  **(57.3**
                  **)**
                  
                  **(10.8**
                  **)****Reversal
                      of inflation restatement adjustment on foreign
                      subsidiaries**
                  
                  
                  **(ii**
                  **)**
                  
                  **(8.4**
                  **)**
                  
                  **(6.2**
                  **)**
                  
                  **(10.7**
                  **)****Capitalized
                      interest, net of amortization**
                  
                  
                  **(iii**
                  **)**
                  
                  **(0.7**
                  **)**
                  
                  **3.3**
                  
                  
                  **(0.5**
                  **)****Deferred
                      charges, net of amortization**
                  
                  
                  **(iv**
                  **)**
                  
                  **43.9**
                  
                  
                  **(5.7**
                  **)**
                  
                  **36.4****Business
                      combination adjustments**
                  
                  
                  **(v**
                  **)**
                  
                  **1,163.7**
                  
                  
                  **726.0**
                  
                  
                  **103.5****FAHZ
                      net assets**
                  
                  
                  **(vi**
                  **)**
                  
                  **(44.4**
                  **)**
                  
                  **(34.0**
                  **)**
                  
                  **(16.7**
                  **)****Pension
                      plan**
                  
                  
                  **(vii**
                  **)**
                  
                  **48.2**
                  
                  
                  **25.5**
                  
                  
                  **33.5****Other
                      post-retirement benefits**
                  
                  
                  **(vii**
                  **)**
                  
                  **(21.6**
                  **)**
                  
                  **(18.7**
                  **)**
                  
                  **2.6****Foreign
                      exchange gain (loss) from translation of foreign
                      subsidiaries**
                  
                  
                  **(ix**
                  **)**
                  
                  **60.1**
                  
                  
                  **(245.2**
                  **)**
                  
                  **52.6****Recognition
                      of Pepsi tax assets**
                  
                  
                  **(x**
                  **)**
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **(148.0**
                  **)****Compensation
                      expense from employee stock ownership plan**
                  
                  
                  **(xii**
                  **)**
                  
                  **(85.6**
                  **)**
                  
                  **(14.3**
                  **)**
                  
                  **(32.0**
                  **)****Fair
                      value adjustment on derivative instruments**
                  
                  
                  **(xiv**
                  **)**
                  
                  **11.0**
                  
                  
                  **(199.0**
                  **)**
                  
                  **153.8****Fair
                      value adjustment on trading securities**
                  
                  
                  **(xv**
                  **)**
                  
                  **2.6**
                  
                  
                  **(6.5**
                  **)**
                  
                  **6.5****Realized
                      gains from sale of available-for-sale securities**
                  
                  
                  
                  
                  
                  **-**
                  
                  
                  **43.7**
                  
                  
                  **-****Minority
                      interest on adjustments above**
                  
                  
                  
                  
                  
                  **8.7**
                  
                  
                  **-**
                  
                  
                  **4.8****Tax
                      incentive**
                  
                  
                  
                  
                  
                  **57.9**
                  
                  
                  **-**
                  
                  
                  **-****Deferred
                      income tax on adjustments above**
                  
                  
                  
                  
                  
                  **(53.2**
                  **)**
                  
                  **99.6**
                  
                  
                  **102.8****Net
                      income under US GAAP**
                  
                  
                  
                  
                  
                  **2,711.0**
                  
                  
                  **1,472.7**
                  
                  
                  **1,689.4**
  F-83
 (ii)  Shareholders’
            equity
  **Ref. Note****23(a)**
                  
                  **2005**
                  
                  **2004**
                  
                  **2003****(Restated)**
                  
                  **(Restated)****Shareholders’
                      equity under Brazilian GAAP**
                  
                  
                  
                  
                  
                  **19,867.3**
                  
                  
                  **16,995.9**
                  
                  
                  **4,308.2****Additional
                      indexation of property and equipment from 1995 to 1997,
                      net**
                  
                  
                  **(i**
                  **)**
                  
                  **45.9**
                  
                  
                  **62.8**
                  
                  
                  **120.1****Reversal
                      of inflation restatement adjustment on foreign
                      subsidiaries**
                  
                  
                  **(ii**
                  **)**
                  
                  **(21.4**
                  **)**
                  
                  **(13.0**
                  **)**
                  
                  **(116.0**
                  **)****Capitalized
                      interest, net of amortization**
                  
                  
                  **(iii**
                  **)**
                  
                  **10.2**
                  
                  
                  **10.9**
                  
                  
                  **7.6****Reversal
                      of deferred charges**
                  
                  
                  **(iv**
                  **)**
                  
                  **(100.1**
                  **)**
                  
                  **(143.9**
                  **)**
                  
                  **(138.2**
                  **)****Business
                      combination adjustment**
                  
                  
                  **(v**
                  **)**
                  
                  **690.1**
                  
                  
                  **(137.1**
                  **)**
                  
                  **(255.1**
                  **)****FAHZ
                      net assets**
                  
                  
                  **(vi**
                  **)**
                  
                  **292.9**
                  
                  
                  **333.6**
                  
                  
                  **342.9****Pension
                      plan**
                  
                  
                  **(vii**
                  **)**
                  
                  **140.0**
                  
                  
                  **91.8**
                  
                  
                  **66.3****Other
                      post-retirement benefits**
                  
                  
                  **(vii**
                  **)**
                  
                  **(117.4**
                  **)**
                  
                  **(95.8**
                  **)**
                  
                  **(77.1**
                  **)****Reversal
                      of dividends not yet declared**
                  
                  
                  **(xi**
                  **)**
                  
                  **9.8**
                  
                  
                  **992.9**
                  
                  
                  **280.2****Advances
                      to employees for purchase of shares**
                  
                  
                  **(xiii**
                  **)**
                  
                  **(114.9**
                  **)**
                  
                  **(175.2**
                  **)**
                  
                  **(234.7**
                  **)****Fair
                      value adjustment on derivative instruments**
                  
                  
                  **(xiv**
                  **)**
                  
                  **14.4**
                  
                  
                  **3.4**
                  
                  
                  **158.7****Unrealized
                      loss on derivative instruments**
                  
                  
                  **(xv**
                  **)**
                  
                  **(34.4**
                  **)**
                  
                  **-**
                  
                  
                  **-****Unrealized
                      gain on available for sale securities**
                  
                  
                  **(xv**
                  **)**
                  
                  **17.2**
                  
                  
                  **17.7**
                  
                  
                  **43.7****Fair
                      value adjustment on trading securities**
                  
                  
                  
                  
                  
                  **2.6**
                  
                  
                  **-**
                  
                  
                  **6.5****Minority
                      interest on adjustments above**
                  
                  
                  
                  
                  
                  **8.7**
                  
                  
                  **-**
                  
                  
                  **-****Deferred
                      income tax on adjustments above**
                  
                  
                  
                  
                  
                  **(109.0**
                  **)**
                  
                  **(67.7**
                  **)**
                  
                  **(130.2**
                  **)****Shareholders’
                      equity under US GAAP**
                  
                  
                  
                  
                  
                  **20,601.9**
                  
                  
                  **17,876.3**
                  
                  
                  **4,382.9**
  c)  US
            GAAP
            supplementary information
  (i)  Property,
            plant and equipment
  **2005**
                  
                  **2004****(Restated)**
                  
                  **(Restated)****Property,
                      plant and equipment**
                  
                  
                  **9,604.0**
                  
                  
                  **11,375.0****Accumulated
                      depreciation**
                  
                  
                  **(5,408.7**
                  **)**
                  
                  **(6,924.7**
                  **)****Property,
                      plant and equipment, net**
                  
                  
                  **4,195.3**
                  
                  
                  **4,450.3**
  (ii)  Recent
            US
            GAAP accounting pronouncements
  In
            November 2004, the FASB issued SFAS No. 151, *Inventory
            Costs-an amendment of ARB No. 43* .
            The
            Statement requires abnormal amounts of idle facility expenses, freight,
            handling
            costs, and spoilage to be recognized as current period charges. This
            Statement
            eliminates the criterion of “so abnormal” and requires that the costs of
            conversion be based on the normal capacity of the production facilities.
            The
            provisions of this Statement shall apply prospectively and are effective
            for
            inventory costs incurred by the Company after December 31, 2005. The
            Company
            will adopt this Statement as of January 1, 2006. The impact of adopting
            these
            new rules is dependent on events that could occur in future periods,
            and as
            such, an estimate of the impact cannot be determined until the event
            occurs in
            future periods.
 F-84
  In
            December 2004, the FASB issued SFAS No. 153, *Exchanges
            of Nonmonetary Assets, an amendment of APB No. 29* .
            This
            Statement amends Opinion 29 to eliminate the exception for nonmonetary
            exchanges
            of similar productive assets and replaces it with a general exception
            for
            exchanges of nonmonetary assets that do not have commercial substance.
            The
            Statement specifies that a nonmonetary exchange has commercial substance
            if the
            future cash flows of the entity are expected to change significantly
            as a result
            of the exchange. This Statement is effective for nonmonetary asset exchanges
            occurring in fiscal periods beginning after June 15, 2005. Earlier application
            is permitted for nonmonetary asset exchanges occurring in fiscal periods
            beginning after the date this Statement is issued. Retroactive application
            is
            not permitted. Management will adopt this Statement as of January 1,
            2006 and
            will apply its standards in the event exchanges of nonmonetary assets
            occur
            after such date.
  In
            December 2004, the FASB issued SFAS No. 123 (Revised 2004), *Share-Based
            Payment, (FAS-123R)* .
            This
            statement replaces FAS-123, *Accounting
            for Stock-Based Compensation* ,
            supersedes APB Opinion No. 25, *Accounting
            for Stock Issued to Employees* ,
            and
            amends FAS-95, *Statement
            of Cash Flows* .
            FAS-123R requires companies to apply a fair-value-based measurement method
            in
            accounting for shared-based payment transactions with employees and to
            record
            compensation cost for all stock awards granted after the required effective
            date
            and for awards modified, repurchased, or cancelled after that date. The
            scope of
            FAS-123R encompasses a wide range of share-based compensation arrangements,
            including share options, restricted share plans, performance-based awards,
            share
            appreciation rights, and employee share purchase plans. SFAS 123R will
            be
            effective for the Company’s fiscal year ending December 31, 2007 The Company is
            currently evaluating the effect that FAS-123R will have on its financial
            position and results of operations .
  In
            June
            2005, the FASB issued SFAS No. 154, *Accounting
            Changes and Error Corrections, a replacement of APB Opinion No. 20 and
            FASB
            Statement No. 3* . 
            SFAS 154 requires retrospective application to financial statements of
            prior
            periods for changes in accounting principles as if such principles had
            always
            been used. The cumulative effect of the change is reflected in the carrying
            value of assets and liabilities as of the first period presented and
            the
            offsetting adjustments are recorded to opening retained earnings. This
            statement
            is effective January 1, 2006. The Company will apply this statement as
            of
            January 1, 2006 as such changes in accounting principles occur.
  In
            March
            2005, the FASB issued FASB Interpretation No. 47, *Accounting
            for Conditional Asset Retirement Obligations* .
            This
            statement requires companies to recognize a liability for the fair value
            of a
            legal obligation to perform asset retirement obligations that are conditional
            on
            a future event if the amount can be reasonably estimated. This statement
            becomes
            effective on December 31, 2005. Management has previously evaluated the
            application of FASB Statement No. 143 to its operations and concluded
            that no
            material effects would be expected.
 F-85
 In
            November 2005, the FASB issued FSP FAS 115-1, *The
            Meaning of Other-Than-Temporary Impairment and Its Application to Certain
            Investments* ,
            which
            outlines a three-step model for identifying investment impairments in
            debt and
            equity securities within the scope of Statement 115 and cost-method investments.
            The three steps involve (1) determining whether the investment is impaired,
            (2)
            evaluating whether the impairment is other-than- temporary, and (3) if
            the
            impairment is other-than-temporary, recognizing an impairment loss. The
            FSP
            carries forward the disclosure requirements of issue EITF 03-1, *The
            Meaning of Other-Than-Temporary Impairment and Its Application to Certain
            Investments.* The
            Company will begin applying this guidance as of January 1, 2006 as circumstances
            arise.
  In
            July
            2005, the FASB issued FSP No. APB 18-1, *Accounting
            By an Investor for Its Proportionate Share of Accumulated Other Comprehensive
            Income of an Investee Accounted for Under The Equity Method in Accordance
            with
            APB Opinion No. 18 Upon a Loss of Significant Influence* ,
            which
            requires that when equity method accounting ceases upon the loss of significant
            influence of an investee, the investor’s proportionate share of the investee’s
            other comprehensive income should be offset against the carrying value
            of the
            investment. To the extent this results in a negative carrying value,
            the
            investor should adjust the carrying value to zero and record the residual
            balance through earnings. The Company will apply this Statement in the
            fiscal
            period beginning January 1, 2006 as the need arises.
 (iv)  Additional
            information - stock ownership plan
  **2005**
                  
                  **2004****Range
                      of purchase prices for outstanding awards**
                  
                  
                  **96.19
                      - 568.65**
                  
                  
                  **70.93
                      - 568.65****Weighted
                      average market price per share (based on quoted market value
                      at date of
                      grant) for awards granted during the year**
                  
                  
                  **-**
                  
                  
                  **670.17****Weighted
                      average exercise price of awards granted in the
                      year**
                  
                  
                  **-**
                  
                  
                  **568.65****Weighted
                      average grant-date intrinsic value of awards granted during
                      year
                      (difference between quoted market price and purchase
                      price)**
                  
                  
                  **-**
                  
                  
                  **101.52****Weighted
                      average purchase prices****At
                      beginning of year**
                  
                  
                  **431.03**
                  
                  
                  **421.09****Granted**
                  
                  
                  **-**
                  
                  
                  **568.65****Exercised**
                  
                  
                  **380.13**
                  
                  
                  **289.75****Forfeited**
                  
                  
                  **471.37**
                  
                  
                  **431.20****At
                      end of year**
                  
                  
                  **509.57**
                  
                  
                  **431.03**
 F-86
  Outstanding
            and exercisable
  Range
                      of 2003
                  
                  Number of shares (thousands)
                  
                  Weighted
                      average
                    purchase prices (*)purchase
                      prices (*)
                  
                  2005
                  
                  2004
                  
                  2003
                  
                  2005
                  
                  2004
                  
                  200370.93
                      - 96.18
                  
                  
                  -
                  
                  
                  9,955
                  
                  
                  16,420
                  
                  
                  -
                  
                  
                  94.34
                  
                  
                  91.2196.19
                      - 139.24
                  
                  
                  642
                  
                  
                  5,573
                  
                  
                  8,100
                  
                  
                  122.97
                  
                  
                  139.24
                  
                  
                  139.24139.25
                      - 196.93
                  
                  
                  -
                  
                  
                  16,466
                  
                  
                  23,997
                  
                  
                  -
                  
                  
                  184.62
                  
                  
                  184.62196.94
                      - 226.74
                  
                  
                  13,503
                  
                  
                  79,584
                  
                  
                  97,094
                  
                  
                  204.03
                  
                  
                  96.12
                  
                  
                  212.94226.75
                      - 477.30
                  
                  
                  -
                  
                  
                  159,123
                  
                  
                  194,652
                  
                  
                  -
                  
                  
                  474.53
                  
                  
                  474.05477.31
                      - 494.87
                  
                  
                  8,584
                  
                  
                  371,335
                  
                  
                  393,426
                  
                  
                  489.03
                  
                  
                  480.13
                  
                  
                  480.25494.88
                      - 568.65
                  
                  
                  342,371
                  
                  
                  9,000
                  
                  
                  -
                  
                  
                  522.86
                  
                  
                  568.65
                  
                  
                  -365,100
                  
                  
                  651,036
                  
                  
                  733,689
                  
                  
                  509.57
                  
                  
                  431.03
                  
                  
                  421.09
  (*)  Expressed
            in whole *reais* -
            R$.
  (v)  Pro
            forma
            fair value effects of stock ownership plan
  We
            have
            calculated the pro forma effects of accounting for the stock ownership
            plan in
            accordance with SFAS No. 123, *Accounting
            for Stock Based Compensation* .
            Had
            compensation cost for the Plan been determined based on the fair value
            at the
            grant date in accordance with the provisions of SFAS No. 123, our US
            GAAP net
            income and earnings per thousand shares would have been as follows:
  **2005**
                  
                  **2004**
                  
                  **2003****(Restated)**
                  
                  **(Restated)****Net
                      income - US GAAP**
                  
                  
                  **2,711.0**
                  
                  
                  **1,472.7**
                  
                  
                  **1,689.4****(+)
                      Compensation cost under APB 25**
                  
                  
                  **85.5**
                  
                  
                  **14.2**
                  
                  
                  **32.0****(-)
                      Compensation cost under SFAS No. 123**
                  
                  
                  **(26.5**
                  **)**
                  
                  **(27.4**
                  **)**
                  
                  **(57.4**
                  **)****2,770.0**
                  
                  
                  **1,459.5**
                  
                  
                  **1,664.0****Earnings
                      per thousand shares - pro forma**
                    **(whole*****reais*****)
                      - R$:****Basic:****Preferred**
                  
                  
                  **51.46**
                  
                  
                  **32.23**
                  
                  
                  **42.75****Common**
                  
                  
                  **46.78**
                  
                  
                  **29.30**
                  
                  
                  **38.87****Diluted:****Preferred**
                  
                  
                  **51.34**
                  
                  
                  **32.05**
                  
                  
                  **42.43****Common**
                  
                  
                  **46.67**
                  
                  
                  **29.14**
                  
                  
                  **38.57**
  These
            pro
            forma results are not necessarily indicative of future amounts.
  During
            2005, no awards have been granted. The fair value of each award granted
            in 2004
            and 2003 was estimated on the date of grant using the Black - Scholes
            pricing
            model with the following weighted average assumptions used for grants,
            respectively: dividend yield - 1.21% and 3.0%, expected volatility -
            32% and
            33%, risk-free interest rate-nominal terms -16.4% and 18.7% and expected
            lives
            of three years for all periods.
 F-87
 **2005**
                  
                  **2004**
                  
                  **2003****Fair
                      value of awards granted in the year measured using the Black &
                      Scholes pricing model (R$ per thousand
                      shares)**
                  
                  
                  **-**
                  
                  
                  **307.7**
                  
                  
                  **337.8****Total
                      fair value of awards granted in the year**
                  
                  
                  **-**
                  
                  
                  **2.8**
                  
                  
                  **130.4**
  d)  US
            GAAP
            condensed financial information
  Based
            on
            the reconciling items and discussion above, the AmBev consolidated balance
            sheet, statement of operations, and statement of changes in shareholders’ equity
            under US GAAP have been recast in condensed format as follows:
  (i)  Condensed
            balance sheets under US GAAP
  **Assets**
                  
                  **2005**
                  
                  **2004****(Restated)**
                  
                  **(Restated)****Current
                      assets:****Cash
                      and cash equivalents**
                  
                  
                  **620.0**
                  
                  
                  **1,092.4****Restricted
                      cash**
                  
                  
                  **256.1**
                  
                  
                  **274.8****Short
                      term investments**
                  
                  
                  **242.7**
                  
                  
                  **212.1****Trade
                      accounts receivable, net**
                  
                  
                  **1,289.3**
                  
                  
                  **1,292.0****Recoverable
                      tax**
                  
                  
                  **518.2**
                  
                  
                  **650.1****Inventories**
                  
                  
                  **1,018.9**
                  
                  
                  **1,091.4****Other**
                  
                  
                  **628.7**
                  
                  
                  **602.3****4,573.9**
                  
                  
                  **5,215.1****Investments:****Investment
                      in affiliates, including goodwill**
                  
                  
                  **1,894.4**
                  
                  
                  **1,876.8****Other**
                  
                  
                  **146.0**
                  
                  
                  **101.8****2,040.4**
                  
                  
                  **1,978.6****Intangible
                      assets****Goodwill**
                  
                  
                  **13,467.7**
                  
                  
                  **13,475.2****Other
                      intangible assets**
                  
                  
                  **5,379.4**
                  
                  
                  **5,861.0****18,847.1**
                  
                  
                  **19,336.2****Property,
                      plant and equipment, net**
                  
                  
                  **4,195.3**
                  
                  
                  **4,450.3****Other
                      assets:****Recoverable
                      sales and income tax**
                  
                  
                  **130.8**
                  
                  
                  **134.2****Deferred
                      income tax**
                  
                  
                  **4,660.5**
                  
                  
                  **2,100.7****Prepaid
                      pension cost**
                  
                  
                  **112.0**
                  
                  
                  **112.4****Restricted
                      deposits for legal proceedings**
                  
                  
                  **480.7**
                  
                  
                  **407.1****Assets
                      held for sale**
                  
                  
                  **104.2**
                  
                  
                  **113.3****Other**
                  
                  
                  **302.6**
                  
                  
                  **221.1****Total
                      assets**
                  
                  
                  **35,447.5**
                  
                  
                  **34,069.0**
 
 **Liabilities
                      and shareholders’ equity**
                  
                  **2005**
                  
                  **2004****(Restated)**
                  
                  **(Restated)****Current
                      liabilities:****Suppliers**
                  
                  
                  **1,255.4**
                  
                  
                  **801.0****Taxes
                      on income payable**
                  
                  
                  **89.8**
                  
                  
                  **609.7****Other
                      taxes payable**
                  
                  
                  **1,162.8**
                  
                  
                  **1,148.2****Short-term
                      debt**
                  
                  
                  **859.7**
                  
                  
                  **3,052.1****Current
                      portion of long-term debt**
                  
                  
                  **211.1**
                  
                  
                  **216.1****Other**
                  
                  
                  **1,114.4**
                  
                  
                  **1,423.7****4,693.2**
                  
                  
                  **7,250.8****Long-term
                      liabilities:****Long-term
                      debt**
                  
                  
                  **5,421.7**
                  
                  
                  **4,000.5****Accrued
                      liability for contingencies**
                  
                  
                  **1,151.1**
                  
                  
                  **1,246.1****Sales
                      tax deferrals**
                  
                  
                  **352.6**
                  
                  
                  **275.7****Post-retirement
                      benefits**
                  
                  
                  **1,060.8**
                  
                  
                  **1,340.7****Other**
                  
                  
                  **2,118.0**
                  
                  
                  **1,959.6****10,104.2**
                  
                  
                  **8,822.6****Minority
                      interest**
                  
                  
                  **48.2**
                  
                  
                  **119.3****Shareholders’
                      equity**
                  
                  
                  **20,601.9**
                  
                  
                  **17,876.3****Total
                      liabilities and shareholders’ equity**
                  
                  
                  **35,447.5**
                  
                  
                  **34,069.0**
  F-88
  (ii)  Condensed
            statements of operations under US GAAP
  **2005**
                  
                  **2004**
                  
                  **2003****(Restated)**
                  
                  **(Restated)****Net
                      sales**
                  
                  
                  **14,836.7**
                  
                  
                  **10,936.7**
                  
                  
                  **7,929.4****Cost
                      of sales**
                  
                  
                  **(5,816.0**
                  **)**
                  
                  **(4,796.7**
                  **)**
                  
                  **(****3,997.1**
                  **)****Gross
                      profit**
                  
                  
                  **9,020.7**
                  
                  
                  **6,140.0**
                  
                  
                  **3,932.3****Operating
                      income (expenses):****Selling
                      and marketing**
                  
                  
                  **(2,723.5**
                  **)**
                  
                  **(1,821.1**
                  **)**
                  
                  **(989.7**
                  **)****General
                      and administrative**
                  
                  
                  **(1,927.3**
                  **)**
                  
                  **(1,304.7**
                  **)**
                  
                  **(790.4**
                  **)****Other
                      operating expense, net**
                  
                  
                  **108.4**
                  
                  
                  **(157.6**
                  **)**
                  
                  **(114.0**
                  **)****4,478.3**
                  
                  
                  **2,856.6**
                  
                  
                  **2,038.2****Non-operating
                      income (expenses)****Financial
                      income (expenses), net**
                  
                  
                  **(1,166.0**
                  **)**
                  
                  **(961.4**
                  **)**
                  
                  **86.8****Other
                      non-operating expense, net**
                  
                  
                  **(183.8**
                  **)**
                  
                  **(250.3**
                  **)**
                  
                  **(101.8**
                  **)****(1,349.8**
                  **)**
                  
                  **(1,211.7**
                  **)**
                  
                  **(15.0**
                  **)****Income
                      before income tax, equity in affiliates and minority
                      interest**
                  
                  
                  **3,128.5**
                  
                  
                  **1,644.9**
                  
                  
                  **2,023.2****Income
                      tax benefit (expense):****Current**
                  
                  
                  **(691.8**
                  **)**
                  
                  **(230.9**
                  **)**
                  
                  **(652.3**
                  **)****Deferred**
                  
                  
                  **61.6**
                  
                  
                  **(20.0**
                  **)**
                  
                  **153.1****(630.2**
                  **)**
                  
                  **(250.9**
                  **)**
                  
                  **(499.2**
                  **)****Income
                      before equity in affiliates and minority interest**
                  
                  
                  **2,498.3**
                  
                  
                  **1,394.0**
                  
                  
                  **1,524.0****Equity
                      in earnings of affiliates**
                  
                  
                  **170.8**
                  
                  
                  **68.1**
                  
                  
                  **155.8****Minority
                      interest**
                  
                  
                  **41.9**
                  
                  
                  **10.6**
                  
                  
                  **9.6****Net
                      income**
                  
                  
                  **2,711.0**
                  
                  
                  **1,472.7**
                  
                  
                  **1,689.4**
  (iii)  Statement
            of comprehensive income
  Under
            Brazilian GAAP, the concept of comprehensive income is not
            recognized.
  Under
            US
            GAAP, SFAS No. 130, Reporting Comprehensive Income, requires the disclosure
            of
            comprehensive income. Comprehensive income is comprised of net income
            and other
            comprehensive income that include charges or credits directly to equity
            which
            are not the result of transactions with owners. For AmBev, the components
            of the
            comprehensive income are (i) the adjustment related to the gains and losses
            arising on the translation to Brazilian *reais* of the
            financial statements of foreign subsidiaries upon consolidation, and
            (ii) unrealized gains on available for sale securities, net of
            tax.
 F-89
  **2005**
                  
                  **2004**
                  
                  **2003****(Restated)**
                  
                  **(Restated)****Net
                      income**
                  
                  
                  **2,711.0**
                  
                  
                  **1,472.7**
                  
                  
                  **1,689.4****Unrealized
                      gains on available for sale securities,****net
                      of tax**
                  
                  
                  **(0.3**
                  **)**
                  
                  **(17.2**
                  **)**
                  
                  **28.8****Unrealized
                      loss on derivative instruments, net of tax**
                  
                  
                  **(22.8**
                  **)**
                  
                  **-**
                  
                  
                  **-****Foreign
                      exchange gain (loss) from translation of****foreign
                      subsidiaries**
                  
                  
                  **(396.5**
                  **)**
                  
                  **(102.2**
                  **)**
                  
                  **(216.4**
                  **)****Other
                      comprehensive income**
                  
                  
                  **(419.6**
                  **)**
                  
                  **(119.4**
                  **)**
                  
                  **(187.6**
                  **)****Comprehensive
                      income**
                  
                  
                  **2,291.4**
                  
                  
                  **1,353.3**
                  
                  
                  **1,501.8**
  (iv)  Condensed
            statement of changes in shareholders’ equity under US GAAP
  **2005**
                  
                  **2004**
                  
                  **2003****(Restated)**
                  
                  **(Restated)****At
                      beginning of the year**
                  
                  
                  **17,876.3**
                  
                  
                  **4,382.9**
                  
                  
                  **3,960.6****Capital
                      increase**
                  
                  
                  **1,920.7**
                  
                  
                  **14,261.8**
                  
                  
                  **77.4****Treasury
                      shares acquired**
                  
                  
                  **(515.2**
                  **)**
                  
                  **(1,639.6**
                  **)**
                  
                  **(330.7**
                  **)****Transfer/Cancel
                      shares**
                  
                  
                  **1,165.6**
                  
                  
                  **-**
                  
                  
                  **-****Additional
                      paid-in capital**
                  
                  
                  **85.5**
                  
                  
                  **14.2**
                  
                  
                  **32.5****Premium
                      received on sale of options**
                  
                  
                  **-**
                  
                  
                  **2.5**
                  
                  
                  **-****Repayments
                      (advances) to employees for purchase**
                    **of
                      shares**
                  
                  
                  **60.3**
                  
                  
                  **59.5**
                  
                  
                  **90.1****Other
                      comprehensive income**
                  
                  
                  **(419.6**
                  **)**
                  
                  **(119.4**
                  **)**
                  
                  **(187.6**
                  **)****Net
                      income**
                  
                  
                  **2,711.0**
                  
                  
                  **1,472.7**
                  
                  
                  **1,689.4****Dividends
                      and interest attributed to shareholders’ equity
                      declared**
                  
                  
                  **(2,282.7**
                  **)**
                  
                  **(558.3**
                  **)**
                  
                  **(948.8**
                  **)****At
                      end of the year**
                  
                  
                  **20,601.9**
                  
                  
                  **17,876.3**
                  
                  
                  **4,382.9**
  24.  SEGMENT
            REPORTING
  Under
            Brazilian GAAP, no separate segment reporting is required.
  Under
            US
            GAAP, SFAS No. 131, *Disclosures
            about Segments of an Enterprise and Related Information* ,
            defines
            operating segments as components of an enterprise for which separate
            financial
            information is available and evaluated regularly as a means for assessing
            segment performance and allocating resources to segments. A measure of
            profit or
            loss, total assets and other related information are required to be disclosed
            for each operating segment. In addition, this standard requires the annual
            disclosure of information concerning revenues derived from the enterprise’s
            products or services, countries in which it earns revenues or hold assets,
            and
            major customers. AmBev’s business is comprised of four main segments: AmBev
            Brazil (divided into Brazil beer, Brazil carbonated soft drinks and
            non-alcoholic non-carbonated (NANC) beverages, and Brazil other products,
            Hispanic Latin America operations excluding Quinsa - HILA-Ex, Quinsa
            and North
            America (Labatt). We have reclassified prior periods to disclose our
            NANC
            segment together with our Carbonated soft drinks segment.
  SFAS
            No.
            131 requires that segment data be presented in the US GAAP financial
            statements
            on the basis of the internal information that is used by management for
            making
            operating decisions, including allocation of resources among segments,
            and
            segment performance. This information is derived from our statutory accounting
            records which are maintained in accordance with Brazilian GAAP. Certain
            expenses
            were not allocated to the segments. These unallocated expenses are corporate
            overheads, minority interests, income taxes and financial interest income
            and
            expense. Certain operating units do not separate operational expenses,
            total
            assets, depreciation and amortization. These amounts were allocated based
            on
            gross sales revenue.
  2005
                  
                  2004
                  
                  2003Net
                      sales:Beer
                  
                  
                  8,119.1
                  
                  
                  6,907.4
                  
                  
                  6,114.6Carbonated
                      soft drinks and NANC
                  
                  
                  1,648.7
                  
                  
                  1,462.8
                  
                  
                  1,332.1Other
                  
                  
                  135.0
                  
                  
                  155.7
                  
                  
                  191.0AmBev
                      Brazil
                  
                  
                  9,902.8
                  
                  
                  8,525.9
                  
                  
                  7,637.7Quinsa
                  
                  
                  1,299.9
                  
                  
                  1,153.0
                  
                  
                  773.7HILA
                      - Ex
                  
                  
                  780.4
                  
                  
                  769.1
                  
                  
                  272.4North
                      America
                  
                  
                  3,975.5
                  
                  
                  1,558.8
                  
                  
                  -Total
                      consolidated
                  
                  
                  15,958.6
                  
                  
                  12,006.8
                  
                  
                  8,683.8Cost
                      of sales:Beer
                  
                  
                  (2,575.3
                  )
                  
                  (2,467.0
                  )
                  
                  (2,503.6
                  )Carbonated
                      soft drinks and NANC
                  
                  
                  (851.7
                  )
                  
                  (820.5
                  )
                  
                  (887.3
                  )Other
                  
                  
                  (61.9
                  )
                  
                  (81.1
                  )
                  
                  (118.6
                  )AmBev
                      Brazil
                  
                  
                  (3,488.9
                  )
                  
                  (3,368.6
                  )
                  
                  (3,509.5
                  )Quinsa
                  
                  
                  (536.7
                  )
                  
                  (510.3
                  )
                  
                  (387.3
                  )HILA
                      - Ex
                  
                  
                  (416.4
                  )
                  
                  (399.2
                  )
                  
                  (147.5
                  )North
                      America
                  
                  
                  (1,300.3
                  )
                  
                  (502.4
                  )
                  
                  -Total
                      consolidated
                  
                  
                  (5,742.3
                  )
                  
                  (4,780.5
                  )
                  
                  (4,044.2
                  )
  F-90
 
 2005
                  
                  2004
                  
                  2003Selling,
                      marketing and distribution expenses:Beer
                  
                  
                  (1,516.1
                  )
                  
                  (1,354.4
                  )
                  
                  (1,014.4
                  )Carbonated
                      soft drinks and NANC
                  
                  
                  (289.9
                  )
                  
                  (232.4
                  )
                  
                  (218.7
                  )AmBev
                      Brazil
                  
                  
                  (1,806.0
                  )
                  
                  (1,586.9
                  )
                  
                  (1,233.1
                  )Quinsa
                  
                  
                  (234.9
                  )
                  
                  (210.8
                  )
                  
                  (159.8
                  )HILA
                      - Ex
                  
                  
                  (291.0
                  )
                  
                  (215.4
                  )
                  
                  (102.8
                  )North
                      America
                  
                  
                  (1,168.0
                  )
                  
                  (438.6
                  )
                  
                  -Total
                      consolidated
                  
                  
                  (3,499.9
                  )
                  
                  (2,451.7
                  )
                  
                  (1,495.7
                  )
 
 General
                      and administrative expenses:Beer
                  
                  
                  (445.2
                  )
                  
                  (372.7
                  )
                  
                  (328.1
                  )Carbonated
                      soft drinks and NANC
                  
                  
                  (16.4
                  )
                  
                  (14.0
                  )
                  
                  (16.2
                  )Other
                  
                  
                  (3.1
                  )
                  
                  (2.9
                  )
                  
                  (4.2
                  )AmBev
                      Brazil
                  
                  
                  (464.7
                  )
                  
                  (389.6
                  )
                  
                  (348.5
                  )Quinsa
                  
                  
                  (49.4
                  )
                  
                  (50.0
                  )
                  
                  (38.4
                  )HILA
                      - Ex
                  
                  
                  (92.8
                  )
                  
                  (80.2
                  )
                  
                  (30.9
                  )North
                      America
                  
                  
                  (223.8
                  )
                  
                  (98.1
                  )
                  
                  -Total
                      consolidated
                  
                  
                  (830.7
                  )
                  
                  (617.9
                  )
                  
                  (417.9
                  )2005
                  
                  
                  2004
                  
                  
                  2003Depreciation
                      and amortization expenses (*):Beer
                  
                  
                  (507.8
                  )
                  
                  (330.7
                  )
                  
                  (339.1
                  )Carbonated
                      soft drinks and NANC
                  
                  
                  (163.8
                  )
                  
                  (109.5
                  )
                  
                  (16.7
                  )Other
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (4.1
                  )AmBev
                      Brazil
                  
                  
                  (671.6
                  )
                  
                  (440.2
                  )
                  
                  (359.9
                  )Quinsa
                  
                  
                  (40.1
                  )
                  
                  (42.8
                  )
                  
                  (31.6
                  )HILA
                      - Ex
                  
                  
                  (56.4
                  )
                  
                  (39.2
                  )
                  
                  (28.5
                  )North
                      America
                  
                  
                  (74.9
                  )
                  
                  (19.3
                  )
                  
                  -Total
                      consolidated
                  
                  
                  (843.0
                  )
                  
                  (541.5
                  )
                  
                  (420.0
                  )Less:Provisions
                      for contingencies and other
                  
                  
                  (71.5
                  )
                  
                  (260.2
                  )
                  
                  (187.9
                  )Other
                      operating expenses, net
                  
                  
                  (1,075.4
                  )
                  
                  (420.9
                  )
                  
                  (240.1
                  )Financial
                      income (expense), net
                  
                  
                  (1,086.7
                  )
                  
                  (776.4
                  )
                  
                  93.1Non-operating
                      expenses, net
                  
                  
                  (234.3
                  )
                  
                  (333.9
                  )
                  
                  (100.7
                  )Income
                      tax expenses, net
                  
                  
                  (845.1
                  )
                  
                  (511.8
                  )
                  
                  (426.1
                  )Profit
                      sharing and contributions
                  
                  
                  (202.8
                  )
                  
                  (152.4
                  )
                  
                  (23.6
                  )Minority
                      interest
                  
                  
                  16.8
                  
                  
                  (3.7
                  )
                  
                  (2.9
                  )Equity
                      in results of Quinsa (proportionally consolidated)
                  
                  
                  2.0
                  
                  
                  5.6
                  
                  
                  (6.2
                  )Net
                      income
                  
                  
                  1,545.7
                  
                  
                  1,161.5
                  
                  
                  1,411.6
  F-91
  Revenues
            from no individual customer represented more than 10% of our net sales.
            Information on our geographic areas is as follows:
  2005
                  
                  2004Total
                      property, plant and equipment:AmBev
                      Brazil
                  
                  
                  2,746.4
                  
                  
                  2,590.0Quinsa
                  
                  
                  770.4
                  
                  
                  750.1HILA
                      - Ex
                  
                  
                  748.2
                  
                  
                  951.5North
                      America
                  
                  
                  1,139.6
                  
                  
                  1,240.15,404.6
                  
                  
                  5,531.7Total
                      segment assets:Beer
                  
                  
                  9,129.8
                  
                  
                  7,371.7Carbonated
                      soft drinks and NANC
                  
                  
                  3,358.6
                  
                  
                  2,237.5Other
                  
                  
                  709.1
                  
                  
                  786.6Quinsa
                  
                  
                  1,818.1
                  
                  
                  942.7HILA
                      - Ex
                  
                  
                  1,230.0
                  
                  
                  1,744.1North
                      America
                  
                  
                  2,895.9
                  
                  
                  4,663.8General
                      corporate assets
                  
                  
                  14,351.3
                  
                  
                  15,270.1Total
                      assets
                  
                  
                  33,492,8
                  
                  
                  33,016.5Total
                      assets by location:Brazil
                  
                  
                  27,548.8
                  
                  
                  25,665.9Quinsa
                  
                  
                  1,818.1
                  
                  
                  942.7HILA
                      - Ex
                  
                  
                  1,230.0
                  
                  
                  1,744.1North
                      America
                  
                  
                  2,895.9
                  
                  
                  4,663.8Total
                      assets
                  
                  
                  33,492,8
                  
                  
                  33,016.5
  (*)
                  Relates
                      primarily to administrative assets and amortization of deferred
                      charges;
                      excludes depreciation of production assets and amortization
                      of goodwill,
                      included in Other operating income,
                      net.
  25.  SUBSEQUENT
            EVENTS
  (i)  Purchase
            of interest of BAC in Quinsa
  On
            April
            13, 2006 AmBev entered into an agreement with BAC pursuant to which BAC
            agreed
            to sell all its remaining shares in Quinsa to AmBev for a total purchase
            price
            of approximately US$1.2 billion, subject to certain adjustments, including
            dividends and interest.
 
 On
            August
            8, 2006, AmBev finalized the acquisition of Quinsa’s shares held by BAC, as
            announced on April 13, 2006 for a purchase consideration of US$ 1.25
            billion.
            This acquisition will increase AmBev’s interest in Quinsa from 56.72% to 91.18%
            and AmBev will fully consolidate Quinsa as from August 1, 2006. The Company
            is
            in the process of obtaining the necessary information in order to perform
            the
            purchase price allocation in accordance with US GAAP based on the estimated
            fair
            values of the assets acquired and liabilities assumed.
  F-92
  (ii)
            Sale
            of interest in AmBev Peru
 
 On
            July
            17, 2006, AmBev concluded the sale of 25% of its interest in AmBevPeru
            to Ransa
            Comercial S.A., a company of the Romero business group (“Romero Group”).
  (iii)  Public
            issuance of debentures
  The
            Board
            of Directors approved on June 8, 2006, a public distribution of nominative,
            book
            entry, non-share convertible, subordinated debentures ("Debentures") in the
            amount of up to R$2.6 billion.
 
 The
            resources obtained by AmBev from the issuance of the Debentures will
            be used as
            payment for the acquisition of the Quinsa shares held by BAC, in accordance
            with what was informed by means of a Notice to Shareholders published
            on April
            13, 2006 (See (i) above).
 
 Alternatively,
            if said resources are not employed totally or partially to this end,
            they will
            be applied towards the liquidation of short-term debt, the implementation
            of
            investment plans and the working capital of the Issuer.
 
 26.
                  RESTATEMENT
                        OF RECONCILIATION OF ACCOUNTING PRACTICES ADOPTED IN BRAZIL
                        AND ACCOUNTING
                        PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA
                        (US GAAP)
                        AND CONDENSED FINANCIAL INFORMATION PREPARED IN ACCORDANCE
                        WITH US
                        GAAP.
 
 Subsequent
            to the issuance of the Company’s 2005 consolidated financial statements, the
            Company’s management determined that the transactions described in Note 23 (a)
            had not been correctly accounted for under US GAAP for the years ended
            December
            31, 2004 and 2005. As a result, the reconciliation of accounting practices
            adopted in Brazil with accounting principles generally accepted in the
            United
            States of America and the condensed financial information prepared in
            accordance
            with US GAAP included in Note 23 have been restated.
 The
                line
                items impacted by the corrections to the reconciliations of net income
                and
                shareholders equity in 2004 and 2005 are as follows:
 F-93
  (a)  Net
              income
 **2004****Ref . Note 26**
                  
                  **As
                      Originally****Reported**
                  
                  **Restated**
                  
                  **Effect
                      of Change****Depreciation
                      of additional indexation of property and equipment from 1995
                      to
                      1997**
                  
                  
                  **(ii**
                  **)**
                  
                  **(9.6**
                  **)**
                  
                  **(57.3**
                  **)**
                  
                  **(47.7**
                  **)****Business
                      combination adjustments**
                  
                  
                  **(i,
                      iii, iv**
                  **)**
                  
                  **569.5**
                  
                  
                  **693.0**
                  
                  
                  **123.5****Deferred
                      income tax on adjustments above**
                  
                  
                  **(v**
                  **)**
                  
                  **127.7**
                  
                  
                  **132.6**
                  
                  
                  **4.9****Net
                      income under US GAAP**
                  
                  
                  
                  
                  
                  **1,392.0**
                  
                  
                  **1,472.7**
                  
                  
                  **80.7****Earnings
                      per thousand shares - Basic****Preferred**
                  
                  
                  
                  
                  
                  **30.74**
                  
                  
                  **32.52****Common**
                  
                  
                  
                  
                  
                  **27.94**
                  
                  
                  **29.56****Earnings
                      per thousand shares - Dilluted****Preferred**
                  
                  
                  
                  
                  
                  **30.57**
                  
                  
                  **32.34****Common**
                  
                  
                  
                  
                  
                  **27.79**
                  
                  
                  **29.40**
 
 **2005****Ref . Note 26**
                  
                  **As
                      Originally****Reported**
                  
                  **Restated**
                  
                  **Effect
                      of Change****Depreciation
                      of additional indexation of property and equipment from 1995
                      to
                      1997**
                  
                  
                  **(ii**
                  **)**
                  
                  **(10.4**
                  **)**
                  
                  **(16.9**
                  **)**
                  
                  **(6.5**
                  **)****Business
                      combination adjustments**
                  
                  
                  **(i,
                      iii, iv**
                  **)**
                  
                  **1,212.3**
                  
                  
                  **1,092.6**
                  
                  
                  **(119.7**
                  **)****Deferred
                      income tax on adjustments above**
                  
                  
                  **(v**
                  **)**
                  
                  **30.9**
                  
                  
                  **17.9**
                  
                  
                  **(13.0**
                  **)****Net
                      income under US GAAP**
                  
                  
                  
                  
                  
                  **2,850.2**
                  
                  
                  **2,711.0**
                  
                  
                  **(139.2**
                  **)****Earnings
                      per thousand shares - Basic****Preferred**
                  
                  
                  
                  
                  
                  **52.95**
                  
                  
                  **50.36****Common**
                  
                  
                  
                  
                  
                  **48.13**
                  
                  
                  **45.78****Earnings
                      per thousand shares - Dilluted****Preferred**
                  
                  
                  
                  
                  
                  **52.82**
                  
                  
                  **50.24****Common**
                  
                  
                  
                  
                  
                  **48.02**
                  
                  
                  **45.68**
  F-94
 (b)  Shareholders’
            equity
  **2004****Ref . Note 26**
                  
                  **As
                      Originally****Reported**
                  
                  **Restated**
                  
                  **Effect
                      of Change****Additional
                      indexation of property and equipment from 1995 to 1997,
                      net**
                  
                  
                  **(ii**
                  **)**
                  
                  **110.4**
                  
                  
                  **62.8**
                  
                  
                  **(47.6**
                  **)****Business
                      combination adjustments**
                  
                  
                  **(i,
                      iii, iv**
                  **)**
                  
                  **(414.8**
                  **)**
                  
                  **(216.0**
                  **)**
                  
                  **198.8****Deferred
                      income tax on adjustments above**
                  
                  
                  **(v**
                  **)**
                  
                  **6.5**
                  
                  
                  **11.3**
                  
                  
                  **4.8****Shareholders’
                      equity under US GAAP**
                  
                  
                  
                  
                  
                  **17,720.3**
                  
                  
                  **17,876.3**
                  
                  
                  **156.0**
  F-95
  **2005****Ref . Note 26**
                  
                  **As
                      Originally****Reported**
                  
                  **Restated**
                  
                  **Effect
                      of Change****Additional
                      indexation of property and equipment from 1995 to 1997,
                      net**
                  
                  
                  **(ii**
                  **)**
                  
                  **100.0**
                  
                  
                  **45.9**
                  
                  
                  **(54.1**
                  **)****Business
                      combination adjustments**
                  
                  
                  **(i,
                      iii, iv**
                  **)**
                  
                  **296.6**
                  
                  
                  **540.1**
                  
                  
                  **243.5****Deferred
                      income tax on adjustments above**
                  
                  
                  **(v**
                  **)**
                  
                  **49.1**
                  
                  
                  **40.9**
                  
                  
                  **(8.2**
                  **)****Shareholders’
                      equity under US GAAP**
                  
                  
                  
                  
                  
                  **20,420.6**
                  
                  
                  **20,601.9**
                  
                  
                  **181.3**
 
 The
            line
            items in the condensed financial information impacted by the corrections
            in 2004
            and 2005 are as follows:
  **2004****Ref
                      . Note 26**
                  
                  **As
                      OriginallyReported**
                  
                  **Restated**
                  
                  **Effect
                      of Change****Condensed
                      balance sheet under US GAAP**
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Investment
                      in affiliates, including goodwill**
                  ****
                  ****
                  **(i**
                  **)**
                  ****
                  **1,711.4**
                  ****
                  ****
                  **1,876.8**
                  ****
                  ****
                  **165.4**
                  ******Property,
                      plant and equipment, net**
                  ****
                  ****
                  **(ii**
                  **)**
                  ****
                  **4,497.9**
                  ****
                  ****
                  **4,450.3**
                  ****
                  ****
                  **(47.6**
                  **)****Deferred
                      income tax**
                  ****
                  ****
                  **(v**
                  **)**
                  ****
                  **2,095.8**
                  ****
                  ****
                  **2,100.6**
                  ****
                  ****
                  **4.8**
                  ******Total
                      assets**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **33,946.4**
                  ****
                  ****
                  **34,069.0**
                  ****
                  ****
                  **122.6**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Other
                      long-term liabilities**
                  ****
                  ****
                  **(iii**
                  **)**
                  ****
                  **1,993.0**
                  ****
                  ****
                  **1,959.7**
                  ****
                  ****
                  **(33.4**
                  **)****Total
                      shareholders’ equity**
                  ****
                  ****
                  **(iv**
                  **)**
                  ****
                  **17,720.3**
                  ****
                  ****
                  **17,876.3**
                  ****
                  ****
                  **156.0**
                  ******Total
                      liabilities and shareholders’ equity**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **33,946.4**
                  ****
                  ****
                  **34,069.0**
                  ****
                  ****
                  **122.6**
  F-96
 **2005****Ref
                      . Note 26**
                  
                  **As
                      Originally Reported**
                  
                  **Restated**
                  
                  **Effect
                      of Change****Condensed
                      balance sheet under US GAAP**
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Investment
                      in affiliates, including goodwill**
                  ****
                  ****
                  **(i**
                  **)**
                  ****
                  **1,729.0**
                  ****
                  ****
                  **1,894.4**
                  ****
                  ****
                  **165.4**
                  ******Property,
                      plant and equipment**
                  ****
                  ****
                  **(ii**
                  **)**
                  ****
                  **4,249.4**
                  ****
                  ****
                  **4,195.3**
                  ****
                  ****
                  **(54.1**
                  **)****Deferred
                      income tax**
                  ****
                  ****
                  **(v**
                  **)**
                  ****
                  **4,668.7**
                  ****
                  ****
                  **4,660.5**
                  ****
                  ****
                  **(8.2**
                  **)****Total
                      assets**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **35,344.4**
                  ****
                  ****
                  **35,447.5**
                  ****
                  ****
                  **103.1**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Other
                      long-term liabilities**
                  ****
                  ****
                  **(iii**
                  **)**
                  ****
                  **2,196.2**
                  ****
                  ****
                  **2,118.0**
                  ****
                  ****
                  **(78.1**
                  **)****Total
                      shareholders’ equity**
                  ****
                  ****
                  **(iv**
                  **)**
                  ****
                  **20,420.6**
                  ****
                  ****
                  **20,601.9**
                  ****
                  ****
                  **181.3**
                  ******Total
                      liabilities and shareholders’ equity**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **35,344.4**
                  ****
                  ****
                  **35,447.5**
                  ****
                  ****
                  **103.1**
  **2004****Condensed
                      statement of changes in shareholders’ equity**
                  ****
                  **Ref
                      . Note 26**
                  ****
                  **As
                      Originally Reported**
                  ****
                  **Restated**
                  ****
                  **Effect
                      of Change**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******At
                      beginning of the year**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **4,382.9**
                  ****
                  ****
                  **4,382.9**
                  ****
                  ****
                  ****
                  ******Other
                      equity transactions**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **12,140.1**
                  ****
                  ****
                  **12,140.1**
                  ****
                  ****
                  ****
                  ******Other
                      comprehensive income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(194.7**
                  **)**
                  ****
                  **(119.4**
                  **)**
                  ****
                  **75.3**
                  ******Net
                      income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **1,392.0**
                  ****
                  ****
                  **1,472.7**
                  ****
                  ****
                  **80.7**
                  ******At
                      end of the year**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **17,720.3**
                  ****
                  ****
                  **17,876.3**
                  ****
                  ****
                  **156.0**
                  ****
  ****
                  **2005**
                  ********
                  ****
                  **Ref
                      . Note 26**
                  ****
                  **As
                      Originally Reported**
                  ****
                  **Restated**
                  ****
                  **Effect
                      of Change**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******At
                      beginning of the year**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **17,720.3**
                  ****
                  ****
                  **17,876.3**
                  ****
                  ****
                  **156.0**
                  ******Other
                      equity transactions**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **434.2**
                  ****
                  ****
                  **434.2**
                  ****
                  ****
                  ****
                  ******Other
                      comprehensive income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(584.1**
                  **)**
                  ****
                  **(419.6**
                  **)**
                  ****
                  **164.5**
                  ******Net
                      income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **2,850.2**
                  ****
                  ****
                  **2,711.0**
                  ****
                  ****
                  **(139.2**
                  **)****At
                      end of the year**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **20,420.6**
                  ****
                  ****
                  **20,601.9**
                  ****
                  ****
                  **181.3**
                  ****
  ****
                  ****
                  **2004**
                  ******Condensed
                      statement of comprehensive income**
                  ****
                  **Ref
                      . Note 26**
                  ****
                  **As
                      Originally Reported**
                  ****
                  **Restated**
                  ****
                  **Effect
                      of Change**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Net
                      income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **1,392.0**
                  ****
                  ****
                  **1,472.7**
                  ****
                  ****
                  **80.7**
                  ******Foreign
                      exchange gain (loss) from translation of foreign
                      subsidiaries**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(177.5**
                  **)**
                  ****
                  **(102.2**
                  **)**
                  ****
                  **75.3**
                  ******Other**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(17.2**
                  **)**
                  ****
                  **(17.2**
                  **)**
                  ****
                  ****
                  ******Other
                      comprehensive income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(194.7**
                  **)**
                  ****
                  **(119.4**
                  **)**
                  ****
                  **75.3**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Comprehensive
                      Income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **1,197.3**
                  ****
                  ****
                  **1,353.3**
                  ****
                  ****
                  **156.0**
  F-97
  ****
                  **2005**
                  ******Condensed
                      statement of comprehensive income**
                  ****
                  **Ref
                      . Note 26**
                  ****
                  **As
                      Originally Reported**
                  ****
                  **Restated**
                  ****
                  **Effect
                      of Change**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Net
                      income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **2,850.2**
                  ****
                  ****
                  **2,711.0**
                  ****
                  ****
                  **(139.2**
                  **)****Foreign
                      exchange gain (loss) from translation of foreign
                      subsidiaries**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(561.0**
                  **)**
                  ****
                  **(396.5**
                  **)**
                  ****
                  **164.5**
                  ******Other**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(23.1**
                  **)**
                  ****
                  **(23.1**
                  **)**
                  ****
                  ****
                  ******Other
                      comprehensive income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **(584.1**
                  **)**
                  ****
                  **(419.6**
                  **)**
                  ****
                  **164.5**
                  ********
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ****
                  ******Comprehensive
                      Income**
                  ****
                  ****
                  ****
                  ****
                  ****
                  **2,266.1**
                  ****
                  ****
                  **2,291.4**
                  ****
                  ****
                  **25.3**
  (i)
            Investment in affiliates, including goodwill: As disclosed in Note 2(ab),
            Quinsa
            has been repurchasing its shares in the market, increasing our interest
            on
            outstanding Quinsa’s shares. The Company did not apply the purchase accounting
            method for this acquisition, as required by the provisions of APB 18
            and charged
            the difference between the consideration paid and the net assets acquired,
            in
            the amount of R$ 165.4 in net income as “other non operating expenses”. In
            accordance with APB 18 paragraph 19 (b), investee transactions of a capital
            nature that affect the investor’s share of the investee’s stockholders equity
            shall be accounted for as if the investee were a consolidated subsidiary.
            As a
            result, the R$ 165.4 charge should have been reported as goodwill in
            2004 under
            US GAAP.
  (ii)
            Property, plant and equipment, net: We have restated our depreciation
            charge for
            2004 and 2005 by additional expenses of R$47.6 and R$6.5, respectively
            to proper
            reflect the depreciation of our US GAAP adjustment. The cumulative impact
            in our
            US GAAP shareholders’s equity was a positive effect of R$ 47.6 and R$ 54.1 in
            2004 and 2005, respectively.
  (iii)
            Put
            option liability: As disclosed in Note 23 (a) (v), in connection with
            the Quinsa
            business combination, the Company has an obligation to sell AmBev shares
            to BAC
            under certain circumstances. This put option liability was overstated
            in 2004
            and 2005 as a result of a calculation error. The cumulative impact in
            our US
            GAAP shareholders’s equity was a positive effect of R$ 33.4 and R$ 78.1 in 2004
            and 2005, respectively. The impact in our net financial expenses for
            2004 and
            2005 was a reduction by R$ 33.4 and R$ 44.7, respectively.
  (iv)
            Translation adjustment from our investment in Labatt: Under BR GAAP,
            translation
            gains or losses are recorded in current earnings as other operating income.
            For
            US  GAAP purposes, we reclassify these adjustments to a Cumulative
            translation adjustment (CTA) account in shareholders’ equity. In the case of the
            translation effects related to our investment in Labatt, this reclassification
            was inadvertently not done. Accordingly we have restated our 2004 and
            2005 net
            income for US GAAP purposes to  reverse the translation gain arising from
            our investment in Labatt to our CTA reserve by R$ 75.3 and R$ 164.4,
            respectively.
 F-98
  (v)
              The
              aforementioned adjustments (i) and (iii) also resulted in our income
              tax expense
              in 2004 and 2005 being restated by R$ 4.8 and R$ (13.0), respectively.
              The
              cumulative impact in our US GAAP shareholders’s equity was a positive effect of
              R$ 4.8 and R$ (8.2) in 2004 and 2005, respectively.
  F-99
  **Exhibits**
  1.1
                  
                  By-laws
                      of Companhia de Bebidas das Américas - AmBev (English-language
                      translation) (incorporated by reference to Exhibit 1.1 to Form
                      20-F filed
                      by the Company on July 1, 2005).1.2
                  
                  Minutes
                      of the Extraordinary Shareholders’ Meeting held on May 18, 2004
                      (incorporated by reference to Form 6-K filed by AmBev on May
                      20,
                      2004).2.1
                  
                  Indenture
                      dated December 19, 2001 between CBB and The Bank of New York
                      as Trustee
                      (incorporated by reference to Exhibit 4.1 to Form F-4 filed
                      by AmBev on
                      August 29, 2002).2.2
                  
                  Form
                      of Note (contained in Exhibit 2.1).2.3
                  
                  Guaranty
                      dated December 19, 2001 between AmBev and The Bank of New York
                      (incorporated by reference to Exhibit 4.3 to Form F-4 filed
                      by AmBev on
                      August 29, 2002).2.4
                  
                  Insurance
                      Policy for Expropriation and Currency Inconvertibility dated
                      December 19,
                      2001 between Steadfast Insurance Company and The Bank of New
                      York
                      (incorporated by reference to Exhibit 4.5 to Form F-4 filed
                      by AmBev on
                      August 29, 2002).2.5
                  
                  Agreement
                      Regarding the Insurance Policy for Expropriation and Currency
                      Inconvertibility dated December 19, 2001 among Steadfast Insurance
                      Company, The Bank of New York, AmBev and CBB (incorporated
                      by reference to
                      Exhibit 4.6 to Form F-4 filed by AmBev on August 29,
                      2002).2.6
                  
                  Indenture
                      dated September 18, 2003 between CBB and The Bank of New York
                      as Trustee
                      (incorporated by reference to Exhibit 2.1 to Form 20-F filed
                      by AmBev on
                      June 30, 2004).2.7
                  
                  Form
                      of Note (contained in Exhibit 2.6).2.8
                  
                  Guaranty
                      dated September 18, 2003 between AmBev and The Bank of New
                      York
                      (incorporated by reference to Exhibit 2.3 to Form 20-F filed
                      by AmBev on
                      June 30, 2004).2.9
                  
                  Agreement
                      Regarding the Insurance Policy for Expropriation and Currency
                      Inconvertibility by the Trustee, AmBev, CBB and the Insurer,
                      dated
                      September 18, 2003 (incorporated by reference to Exhibit 2.5
                      to Form 20-F
                      filed by AmBev on June 30, 2004).2.10
                  
                  Application
                      for Political Risk Insurance for Capital Markets Transactions,
                      executed by
                      the Trustee (incorporated by reference to Exhibit 2.6 to Form
                      20-F filed
                      by AmBev on June 30, 2004).3.1
                  
                  Amendment
                      to the Shareholders' Agreement of Companhia de Bebidas das
                      Américas -
                      AmBev dated as of March 2, 2004 among FAHZ, Braco, ECAP, AmBev,
                      Jorge
                      Paulo Lemann, Marcel Herrmann Telles, and Carlos Alberto da
                      Veiga Sicupira
                      (English-language translation) (incorporated by reference to
                      Exhibit 2.16
                      to Amendment No. 9 to Schedule 13D relating to Quinsa, filed
                      by AmBev on
                      March 9, 2004).3.2
                  
                  Incorporação
                      Agreement dated March 3, 2004 (incorporated by reference to
                      Exhibit 2.13
                      to Amendment No. 9 to Schedule 13D relating to Quinsa, filed
                      by AmBev on
                      March 9, 2004).3.3
                  
                  Shareholders’
                      Voting Rights Agreement of S-Braco Participações S.A. dated as of August
                      30, 2002 among Santa Judith, Santa Irene, Santa Estela and
                      Santa Prudência
                      Participações S.A., with Jorge Paulo Lemann, Carlos Alberto da Veiga
                      Sicupira and Marcel Herrmann Telles as intervening parties,
                      and S-Braco,
                      Braco, ECAP and AmBev as acknowledging parties (English-language
                      translation) (incorporated by reference to Exhibit C to Amendment
                      No. 2 to
                      Schedule 13D relating to AmBev, filed by FAHZ, Braco and ECAP
                      on November
                      29, 2002).
  135
 
 3.4
                  
                  AmBev
                      Share Transfer Agreement dated as of January 31, 2003, among
                      BAC, Braco,
                      ECAP, FAHZ and AmBev (incorporated by reference to Exhibit
                      2.7 to
                      Amendment No. 1 to Schedule 13D relating to Quinsa, filed by
                      AmBev on
                      February 4, 2003).3.5
                  
                  AmBev
                      Governance Agreement dated as of January 31, 2003, among BAC,
                      Braco, ECAP,
                      FAHZ and AmBev (incorporated by reference to Exhibit 2.8 to
                      Amendment No.
                      1 to Schedule 13D relating to Quinsa, filed by AmBev on February
                      4,
                      2003).4.1
                  
                  Purchase
                      Agreement dated as of September 11, 2003, among Companhia de
                      Bebidas das
                      Américas - AmBev and Citigroup Global Markets Inc. (incorporated
                      by
                      reference to Exhibit 1.1 to Form 20-F filed by AmBev on June
                      30,
                      2004).4.2
                  
                  Registration
                      Rights Agreement dated as of September 18, 2003, among CBB
                      and Companhia
                      de Bebidas das Américas - AmBev as Guarantor and Citigroup Global Markets
                      (incorporated by reference to Exhibit 1.1 to Form 20-F filed
                      by AmBev on
                      June 30, 2004).4.3
                  
                  Performance
                      Agreement between AmBev and the Conselho Administrativo de
                      Defesa
                      Econômica - CADE, dated April 19, 2000 (incorporated by reference
                      to
                      Exhibit 10.8 to the Form F-4 filed by AmBev on August 29,
                      2000).4.4
                  
                  Share
                      Exchange Agreement dated as of May 1, 2002, between AmBev and
                      Quinsa
                      (incorporated by reference to Exhibit 2.1 to Schedule 13D relating
                      to
                      Quinsa, filed by AmBev on May 13, 2002).4.5
                  
                  Stock
                      Purchase Agreement dated as of May 1, 2002, between BAC and
                      AmBev
                      (incorporated by reference to Exhibit 2.2 to Schedule 13D relating
                      to
                      Quinsa, filed by AmBev on May 13, 2002).4.6
                  
                  Amendment
                      No. 1 to Stock Purchase Agreement dated as of January 31, 2003,
                      between
                      BAC and AmBev (incorporated by reference to Exhibit 2.3 to
                      Amendment No. 1
                      to Schedule 13D relating to Quinsa, filed by AmBev on February
                      4,
                      2003).4.7
                  
                  Letter
                      Agreement dated January 13, 2003, between AmBev, BAC and Quinsa
                      (incorporated by reference to Exhibit 2.4 to Amendment No.
                      1 to Schedule
                      13D relating to Quinsa, filed by AmBev on February 4,
                      2003).4.8
                  
                  Quinsa
                      Shareholders’ Agreement dated as of January 31, 2003, among Quinsa, AmBev
                      and BAC (incorporated by reference to Exhibit 2.5 to Amendment
                      No. 1 to
                      Schedule 13D relating to Quinsa, filed by AmBev on February
                      4,
                      2003).4.9
                  
                  Registration
                      Rights Agreement dated as of January 31, 2003, among BAC and
                      AmBev
                      (incorporated by reference to Exhibit 2.6 to Amendment No.
                      1 to Schedule
                      13D relating to Quinsa, filed by AmBev on February 4,
                      2003).4.10
                  
                  Share
                      Pledge Agreement dated as of January 31, 2003, among BAC, AmBev
                      and Quinsa
                      (incorporated by reference to Exhibit 2.9 to Amendment No.
                      1 to Schedule
                      13D relating to Quinsa, filed by AmBev on February 4,
                      2003).4.11
                  
                  Escrow
                      Agreement dated as of January 31, 2003, among BAC, AmBev and
                      The Bank of
                      New York (incorporated by reference to Exhibit 2.10 to Amendment
                      No. 1 to
                      Schedule 13D relating to Quinsa, filed by AmBev on February
                      4,
                      2003).4.12
                  
                  Resolution
                      of the Office of Competition, Deregulation and Consumer Advocacy
                      of the
                      Ministry of Production of the Republic of Argentina regarding
                      the business
                      combination of AmBev and Quinsa dated January 13, 2003 (English-language
                      translation) (incorporated by reference to Exhibit 2.11 to
                      Amendment No. 1
                      to Schedule 13D relating to Quinsa, filed by AmBev on February
                      4,
                      2003).
  136
 
 4.13
                  
                  License
                      Agreement dated as of January 31, 2003, between AmBev and Quinsa
                      (incorporated by reference to Exhibit 4.11 to Form 20-F filed
                      by AmBev on
                      June 30, 2003).4.14
                  
                  Distribution
                      Agreement dated as of January 31, 2003, between AmBev and Quinsa
                      (incorporated by reference to Exhibit 4.12 to Form 20-F filed
                      by AmBev on
                      June 30, 2003).4.15
                  
                  Termination
                      of the Letter Agreement, dated June 22, 2004, between Labatt
                      Holding, B.V.
                      and Interbrew International, B.V. (incorporated by reference
                      to Exhibit
                      4.15 to Form 20-F filed by the Company on July 1,
                      2005).4.16
                  
                  Letter
                      from InBev to AmBev and Labatt, relating to Labatt Tax Reassessment,
                      dated
                      March 4, 2005 (incorporated by reference to Exhibit 4.16 to
                      Form 20-F
                      filed by the Company on July 1, 2005).4.17
                  
                  Confirmation
                      of Intellectual Property and Hedging Arrangements, dated August
                      27, 2004,
                      to AmBev and Labatt from Interbrew S.A. (incorporated by reference
                      to
                      Exhibit 4.17 to Form 20-F filed by the Company on July 1,
                      2005).4.18
                  
                  Executed
                      Letter Agreement dated July 22, 2004, to AmBev from Interbrew
                      regarding
                      the provision of certain information relating to each business
                      and its
                      affiliates (incorporated by reference to Exhibit 4.18 to Form
                      20-F filed
                      by the Company on July 1, 2005).4.19
                  
                  Labatt
                      Services Agreement, dated August 27, 2004, between Labatt Brewing
                      and
                      Interbrew S.A. regarding services until December 31, 2004 (incorporated
                      by
                      reference to Exhibit 4.19 to Form 20-F filed by the Company
                      on July 1,
                      2005).4.20
                  
                  Labatt
                      Services Agreement, dated August 27, 2004, between Interbrew
                      S.A. and
                      Labatt Brewing regarding services until December 31, 2004 (incorporated
                      by
                      reference to Exhibit 4.20 to Form 20-F filed by the Company
                      on July 1,
                      2005).4.21
                  
                  Transfer
                      Agreement, dated August 2004, among Interbrew S.A., Interbrew
                      International, AmBev and Jalua Spain S.L. (incorporated by
                      reference to
                      Exhibit 4.21 to Form 20-F filed by the Company on July 1,
                      2005)4.22
                  
                  License
                      Agreement, dated March 21, 2005, between AmBev and InBev (incorporated
                      by
                      reference to Exhibit 4.22 to Form 20-F filed by the Company
                      on July 1,
                      2005).4.23
                  
                  Letter
                      Agreement dated April 13, 2006, between AmBev, BAC and Quinsa
                      (incorporated by reference to Exhibit 2.4 to Amendment No.
                      14 to Schedule
                      13D relating to Quinsa, filed by AmBev on April 17,
                      2006).8.1
                  
                  List
                      of Material Subsidiaries of Companhia de Bebidas das Américas - AmBev
                      (incorporated by reference to Exhibit 8.1 to Form 20-F filed
                      by the
                      Company on July 1, 2005).11.1
                  
                  Code
                      of Business Conduct (English-language version) (formerly Code
                      of Ethics)
                      (incorporated by reference to Exhibit 11.1 to Form 20-F filed
                      by AmBev on
                      June 30, 2004).11.2
                  
                  Amendment
                      to Code of Business Conduct (English-language version) (incorporated
                      by
                      reference to Exhibit 11.2 to Form 20-F filed by the Company
                      on July 1,
                      2005)12.1
                  
                  Principal
                      Executive Officer Certification pursuant to Section 302 of
                      the
                      Sarbanes-Oxley Act of 2002.12.2
                  
                  Principal
                    Executive Officer Certification pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.12.3
                  
                  Principal
                      Financial Officer Certification pursuant to Section 302 of
                      the
                      Sarbanes-Oxley Act of 2002.
  137
 
 13.1
                  
                  Principal
                      Executive Officers' Certification pursuant to Section 906 of
                      the
                      Sarbanes-Oxley Act of 2002.13.2
                  
                  Principal
                      Financial Officer Certification pursuant to Section 906 of
                      the
                      Sarbanes-Oxley Act of 2002.
  138
  Pursuant
            to the requirements of Section 12 of the Securities Exchange Act of 1934,
            the
            registrant, Companhia de Bebidas das Américas - AmBev, certifies that it meets
            all of the requirements for filing on Form 20-F and that it has duly caused
            and authorized the undersigned to sign this annual report on Form 20-F
            on its
            behalf.
  **COMPANHIA
                      DE BEBIDAS DAS AMÉRICAS - AMBEV**By:
                  /s/
                      Luiz Fernando Ziegler de Saint EdmondName:Luiz
                      Fernando Ziegler de Saint EdmondTitle:Chief
                      Executive Officer for Latin America
 By:
                  /s/
                      Miguel Nuno da Mata PatricioName:Miguel
                      Nuno da Mata PatricioTitle:Chief
                      Executive Officer for North America
  Date:
            November 22,
            2007
  139